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Indymac, Freddie Mac, and Fannie Mae

Started by pkamm, 07/12/2008 08:27PM
Posted 07/12/2008 08:27PM Opening Post
So at the end of the day Friday the feds stepped in and took over Indymac, icon of the Alt-A mortgage business. Mortgage mammoths Fannie Mae and Freddie Mac were trading all over the place on Friday -- clearly these last two are in the 'too big to fail' category from the standpoint of government intervention (though the form of that intervention may be of no use to stockholders). Anyone care to speculate on:

1) form of intervention to occur, and
2) the overall effect on the bond and mortgage markets, and the economy at large?
Posted 07/13/2008 04:07AM #1
1) Print money for solvency
2) Calls for more regulation, weakening dollar, inflation.
Posted 07/14/2008 06:16AM #2
Freddie and Fannie are massive marketplace intervention in and of themselves. They've encouraged millions of people to sign up for 30 year mortgages in an economy that offers 3 year jobs. They've also encouraged banks to take risks on many people who were not rock solid financially. Banks and mortgage brokers made a lot of risky loans knowing the government was behind them.

Future generations of Americans need to be highly mobile and able to go to work where they can find it. Encouraging home ownership may not enable them to easily do this and may tie them to communities that offer little in the way of opportunity.

Houses and mortgages don't make communities stable. An abundance of good long term jobs and multiple economic opportunities make communities stable. We have invested a lot in making sure that people buy houses. I'm not completely sure that this was a wise policy. Maybe the federal government should look at creating a climate where jobs are plentiful and let individuals worry about mortgages?

I have several telescopes, but none are semi-APO, APO, or in anyway valuable.