The Bush administration informed the executives of Fannie Mae and Freddie Mac (mortgage entities) the government is preparing to seize the two companies.
The two companies play a vital role in the mortgage lending industry and affect tens of millions of homebuyers. It will now be in the hands of the government as the executives and their boards will be replaced.
If indeed they go into receivership the remaining stock shares will be worth very little. Any loses on mortgages they own or guarantee will be paid by taxpayers.
With no sign losses will stop anytime soon; basically the government is trying to avoid a situation where Fannie Mae and Freddie Mac reach a tipping point (similar to Bear Stearns).
With a lot riding on these two companies hopefully it can be corrected in time.
Fine, I suppose this is where you look for some witty insights to my mind. A "bio" of sorts. Here is the deal... I ride motorcycles, smoke cigars, golf, kayak, fly, race my car through the mountains, write (a lot), and travel extensively. I am almost old enough not to care what other people think about me...almost. ~Godfadr
I don’t think we have seen the end of this one!
CNN is reporting that the CEO’s of both have been “let go” and they walked away with packages and benefits totaling approximately $24MILLION combined. THAT is obscene! WHO is paying that money to them? US that’s who.
If you are fired from your job for failing to do you job are you given severance packages and benefits? No, neither am I. But these clowns walk away scot free with millions?
This is just the beginning and nowhere near the end.
Yea, SWF. Maybe we need to start a company that fails and get a government payoff!
I’d agree with you Godfather, BUT, us peons just get to go directly to jail………….we haven’t paid off enough people to get us out and give us millions for screwing up in the first place.
I don’t agree with the payout (although I really don’t know the details).
I don’t think Jail time is really an option since they didn’t really do anything illegal – as far as a new ineptitude is still not a crime.
In all fairness, the current situation is not limited to them by any means. It is a result of greed on so many levels. Not just lenders, but buyers as well.
I still go back to my April 22 post…
http://theslowbleed.com/2008/04/22/today’s-economy-financial-stupidity-or-greed/
Something I recently heard, was that a lot of these Freddie and Fannie backed mortgage loans, were actually caused by the government writing in clauses forcing them to lend money sub-prime candidates….maybe some sort of Great Society-esque move, I don’t really know. I merely caught a bit on some random talk radio show while flipping through stations last night at work.
The phasing out of Fannie Mae and Freddie Mac will bring back private capital and banks to the real estate market and the playing field will be level for private capital investment. Borrowers will also be required to put down a larger down payment.