Good Morning Middle America, your King of Simple News is on the air.
Yesterday I made my future prediction for residential housing. In those predictions I stated that government would pull out all of the stops to save the non-sustainable housing industry.
I talked about Fannie Mae and Freddie Mac in my book. Today, as I suggested, they are broke. Our government however believes that these mortgage giants are too big to fail, yet failure was obvious to me from the outset. What will be the eventual cost for bailing out Fannie and Freddie? Some believe as much as $300 Billion, while others don’t think that is enough.
Yesterday President Bush dropped his objections to the bailout plan that was poised to aid the failing mortgage giants by allowing Freddie and Fannie access to $25 Billion of government loans. The vote passed the House and is expected to move quickly through the Senate.
The Congressional Budget Office says that the two big lending agencies may not need any of the money and worse case losses would be less than $100 Billion. I doubt it.
Please remember that Fannie Mae and Freddie Mac are publicly traded stocks that receive special government treatment…such treatment as not allowing them to go broke with the help of your tax dollar. I bet the Enron folks wish that they had gotten the same treatment.
The question that begs to be asked is where would our government ever get the money to bail out the beleaguered lenders? The answer is of course that they would borrow it from foreign nations and promise those nations that the U.S. taxpayers were good for it.
What didn’t make the main stream news was a little ditty at the end of the bailout legislation. News that is so staggering that it should have been headlined all across America. Remember my question as to where our government would get the money? This nifty piece of legislation also contains a provision to raise the National Debt ceiling by $800 BILLION, to a new record of $10.6 TRILLION!!