Government takes control of� Fannie, Freddie

Think again! Who controls the congress, which appropriates funds? You might want to take a hard look at your own party, and stop listening to their propaganda.

Hate to tell you this, but this is not about who is leading (by a razor thin margin) in congress.

The plan, which was delivered by Treasury Secretary Henry Paulson and James Lockhart, director of the Office of Federal Housing Enterprise, places the twin mortgage buyers into "conservatorship" to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing.

"We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said.

Chuck, I understand your frustration here. But in this case I don't see any real choice. These two mortgage giants were very unstable, a lot of the debt was held by foreign investors, this had huge implication on our entire economy. This admin, and all of the conservative talk show hosts keep trying to play down how bad things have been, are and will be. But these two bailouts clearly illustrate the facts, things are pretty darned bad.

Hey Alfer,

These two started as government programs instead of us going back and forth here we need to call our elected officials and tell them stop waisting our tax money and maybe they would stop increasing them.

Hey FrequencyHopper...I'm a registered Independent. I don't have to "take hard look at my own party" as I do that for both.

So mykola should we all run our opinions through you from now on to make sure they agree with your views. Nice to know that the first amendment is alive and well. Thank you for protecting me from other points of view. I mean , after all, it is treason to disagree with the official view isn't it? While we are at it why don't we do away with elections and just let you choose for us?

This is more an executive-branch screw-up than anything congress has done. This is what comes of the attitude that all regulation is bad, and appointing industry flunkies and lobbyists to oversee the industry they are loyal to. This goes back to George Bush and his dysfunctional government that would rather start wars than do the hard work of governing. McCain would do more of the same until this country sees another great depression.

If Democrats had tried to address this problem, the solution would have been filibusterers in the Senate like everything else, unless King George told them to pass it so he could veto it personally. But since Republicans have blocked the Democratic congress every way possible, this baby is all their fault.

surely nobody here is naive enough to think that one party is the good guys and the other is the bad guys

Oh, yes they are...and don't call them 'Shirley.'

Republicans leech off Americans everyday...it's their way of life

It's a crass generalization and will serve only to upset people who disagree with you

I believe it's what the repub party has been reduced to over the past 30 years, spent the last 8 in this war profiteering administration and there was scant republican opposition. This IS leeching off of Americans through our taxes and the lives of our children whom they sent off to fight their illegal war.
When we found out we were lied to and Bush and cheney ignored intelligence that didn't fit their agenda, it was nearly 100% dems who opposed the war and wanted investigations and answers . It was republicans who stonewalled, lied , destroyed records , initiated an illegal wire tapping program among the huge list of crap the REPUBLICANS have pulled ---and I will continue to tell the truth and state the facts.
If someone's a crook there is no nice way to say "you are a crook" . If repubs don't want to be referred to as leeches --then they can stop leeching while simultaneously accusing others of what they themselves are doing.

Anyone who can stand proudly behind the republican party is a part of the corruption itself because they willfully ignore the evidence against this administration and continue to spread the BS instead of trying to really work out what's right for ALL Americans and get to the bottom of the corruption.

So, while I agree it is a crass generalization, it is also the truth and I stand by my statement.

Keep in mind, it's ok when a republican does it.

The faith based initiative is a form of socialism, but they support it don't they?

The housing issues is a big deal, but it is also a market correction that NEEDS to happen. We want to get housing affordability and paystubs on the same playing field. A gov't bail out is a bad thing. Keep in mind, a government that gives you a lot, can take a lot away.

Frequency, In general I would agree with you. However, anyone who calls 4 million homes headed for foreclosure, and who knows how many more to come, a 'market correction, simply doesn't understand the market. This went past 'market correction' a couple of million homes ago. As far as the bailout goes, I disagree with it from a personal perspective. However, I don't see any other choice in this case. Not doing so would have sent our already fragile economy, and foreign economies (which in turn effect ours) into a tailspin.

Okay, I'm a conservative republican and I will state that I am not happy with this bail out. I hold both President Clinton and Bush responsible as both made it easier for people who had poor or bad credit easier to obtain a mortgage. I hold both republican and democrats in congress responsible as well, Although I agree with President Bush on many issues, I am disappointed in some of his positions, this being one of them.

I am only voting for McCain because I fear what Obama would do to this nation. McCain was not my first choice.

McCain will do a good job of keeping any other problems and criminality hidden for another 4 years; maybe until there is no surviving the next big revelation.

McCain fits the Republican mold very well; they like puppet presidents of less than average curiosity; it really helps to keep the malfeasance hidden.

Montana Girl

Great you see that both parties have poisoned the well but you still will vote for them. It's your coolaide lady.

I am pleading with you to not vote for either party they are only going to continue to poison us.

Think about!

Actually, at this point the government could give 'jack' and still take everything away.

How many of your cities have command of 'state ICBMs' to fight the Federal military?

I some what agree with you "mscotting". Houses are over priced in most markets and people who bought home they could not afford unless they received adjustable low rate loans are the one responsible along with the lenders. This is now going to effect our financial system because our taxes get to pay off loans and let people keep the homes they could not otherwise afford.

For many generations, being able to get a mortgage was proof you were a responsible person and the price was reasonable; I suspect there are many people in trouble now who are saying to themselves "but the bank assured us we could afford it, and that everybody was doing it this way".

The problem is with removing regulation suddenly, before people have a chance to adjust their frame of mind.

I remember when I bought my place; the Real estate agent was pretty pissed that I wanted to buy what I needed, and not the most expensive place I could afford. I was right and she was wrong, but nobody backed me up on my decision.

It's kind of like our press, they were honest and presented all sides of an issue for so long, that now when they lie to us we believe them anyway, and if another side to an issue isn't given, we assume there is no legitimate other side.

Folks, read that again and repeat it to anyone who wants to blame this mess on "a few real estate speculators" or "people that can't read a contract". More than FOUR MILLION AMERICAN HOMEOWNERS!

no kidding msscottring.

This is not because home owners were irresponsible --that is just a tiny part. Deregulation and the constant "hands off the private economy" mantra from republicans created this mess.

These banks and investment houses have no idea what's on their portfolios. In order to maximize profits they exploited their professional relationship with their customers and talked them into buying the biggest houses they could possibly buy and then bundled these sub prime mortgages into securities so they would be sellable (as an investment) on the market. This spread the risk around to investment houses that didnt check into what they were buying or didn't care, or were taken by appraisers who over valued properties.

There's so much more that plays into this story.

There's a part of me that says let the free market work it out, let these banks fail... and then maybe these wealthy people will have a big enough bite taken out of their a$$ they might actually learn what it means to have compassion.

Unfortunately, in order to accomplish that (as well as the very reason we still bail out these hypocrites who rail against socalism while saving themselves using it) too many people would have to suffer unnecessarily before these people would be affected.

That's a major component that needs to be discussed. Republicans want a lack of regulation, and I don't think we can ignore the impact of that lack of regulation any longer.

Well, I'm much better off than I was 8 years ago. My telecom company went bankrupt in 1999 during the Clinton admin when the Telecom bubble burst and I lost all of my company stock, stock options and 401K. My company matched our 401K in company stock. I lost close to $100K. Our CEO destroyed our company and we were under investigation for fraud.

I knew of many people who lost their very exspenive homes when the Telecom bubble burst.

I was the 38th employee and watch the company grow to over 4000 in the 9 years I was there.

Our CEO was VERY close friends with Clinton and gave company money to support his campaign.

He was a democrat and got off with a 9 million golden parachute with a slap on the wrist so please don't blame republicans when it is obvious that both elected republicans and democrats in office share the blame.

It took almost 5 years of working two jobs at times and getting laid off a second time to get back in the black. I still paid my mortgage but my life style has changed but I am MUCH better off now than I was back then.

Minimal regulation is not optimal regulation. Minimal regulation is no regulation; and it gets us business with Enron levels oh honesty. The Bush administration has been really into "minimal" regulation; in the mining industry it got people killed for lack of basic safety equipment because no regulator came around to check on industry.

There are memos, now public, telling mortgage agents how to defeat their own systems and get the computer to allow them to place a bad mortgage; things that everybody involved had to know was dishonest and illegal; things like adding another zero to the income.

I'm worse off than 8 years ago, but that's neither here nor there.

We're absolutely fanatic abut petty crimes. We'll get you for that parking ticket. But when it comes to billion-dollar crimes that could sink the whole economy, all we can do is bail out the mess at taxpayer expense after the fact?

Pretty much. A purse snatcher going down doesn't topple the economy.

It's a no win situation.

I don't think you all really get it.

You talk about people who can't afford their homes.

I will tell you that the ones who are in default, are the ones who could have a nice home, but were talked into a more expensive one.

The ARM (adjustable rate mortgage) was set up for market speculation and it failed.

Who in their right mind would sell a home on a low percentage note, with a balloon payment in 3-5 years. Things were not that good then, and now the cows are coming home, the money has dried up, and the economy had gone to @!$%#.

The people who got this type of loan, either had really good credit, or had high income.

Some of you have been talking about "no doc" loans. This type of loan really wasn't a no documents at all loan. The person taking out the mortgage had to prove that they had the income to pay for it, either through bank deposits or income tax returns. These kinds of people either don't have the income anymore, or just don't know how to spend their money.

Now, you figure the downturn in the dollar, rising cost of food, fuel, lower real wage, and other daily expenses climbing at an alarming rate, you have a recipe for disaster. And wasn't it the fed who kept slashing the prime rate? There goes your margin for profit.

Now consider that these companies are still getting a return on 90% of their money. This means that there should still be a profit involved here.

If I loan out $100, at an interest rate anywhere from 2%-14% apr and only get back 90% of the principle plus the interest, I will still make a profit on my money.

This is business and playing the market. Both carry risk of failure. So why is the government stepping in to fix it? Because their friends who are playing the market don't want to lose their investment or lose their income.

Life comes with risk, we don't need the taxpayers of this country to cover someones bet they placed in Vegas. And we don't need to cover others bets on their business or stock picks.

A return on investment is never a gimme.

Sorry Old Man, but have you heard of the term "NINJA"? I think it stands for "No income" ,"No job" "(no) assets". Loans were indeed written for people in this position. And add to that appraisals where the determining factor was " what do you want it to be?" In a lot of cases these loans would not have been written in a market with reasonable controls by the Fed. And then to bundle this bogus package as if it had actual value just worsened the situation. Wait until it "trickles down" to pension plans and you get the double whammy. No pension and have to pay for it too. And also add in what will surely be a nice golden parachute for the perpetrators of this mess.

I keep wondering why nobody is going to jail. Maybe Democrats will look for the guilty next year, the Republicans clearly have no interest in uncovering the fraud this year.

I will tell you this.

I was told that a 3 year ARM would be a good thing for me. I opted for a 20 year fixed at around 6% and paid it off in 10 years. That worked out best for me.

I also didn't buy a "new" home that was over inflated.

I bought a bank repo, that aprasied for around 180k and bought it for 70k with 15k back a close. I put 15k down. My credit was not that great (due to divorce) but I did get a loan and paid it off.

We are talking about a 2600 square foot home, 1 acre lot, in a nice area, good schools, and now is valued at about 220k. And yes, this was in a large market area (1 million pop.), not some little Mayberry town. You just have to shop and pick for you, not what someone else says you can get.

Just 2 miles away, in a subdivision, there are 80% of the homes that have defaulted and are on the market. It would have cost me a minimum of 250k for a 1700 sf home in that area. Same schools, same crime rate (or lack of). They are on the market for as low as 80k.

The people who got loans with no docs, are not to blame, the mortgage companies are the ones.

We shouldn't have to take the heat for their mistake.

If you are saying that 10% of the loans out there were no job, no income, and no assests, and these are the ones failing, the it is not my fault or responsibility to clean it up.

It is not my problem, it is the company's. People won't lose their homes if these guys go under. Someone will buy the paper and payments will still flow in.

With the governmen taking over, we have just let the cat out of the bag, and left the taxpayers with a large bill just to keep these comanies afloat.

Cranky old man hit it right on the head with one miss, if a perspective home buyer can not compute how much loan they can afford to pay back, they need a reality check. Everyone knows deep down if you stick your hand in the fire, YOU WILL GET BURNED.

This action is certain to bring out some pretty strong reactions, from both political parties. But I just don't see where there were any reasonable choices other than the one that was made (even though I fundamentally disagree with it).

I think we should start to prioritize prison space by economic damage done. Let out a few people on mandatory sentences for a little pot to make room for the CEOs and board members engaged in multi-million dollar frauds.

If a CEO damages the company, there should be no golden parachute; there should be a demand for compensation for the damage.

Buddy they dumped all the common share holders on the floor into the fire.

You call that as it should be. No, you are missing the point the fed did not make anybody whole here. They have their fingers in "the" dike and are moving to using their toes and we all will lose bigger in the end because they are stalling off a major system wide failure. It is still coming but instead of before the election it will come after it.

Are you ready for a complete market meltdown?

Can you say "I'm from the government and I'm here to help"?

It's kind of proof that business doesn't have all the answers. A government function was privatized, and now the government has to take it back because private industry botched the job.

How many other privatized government functions will be costing us in the near future?

How many greedy, short-term profit / long-term-ignorance directors are there?

In 2000 China, Hong Kong, and Taiwan held $153 billion in U.S. Treasury Securities and OPEC held $43.6 billion. Today, China, Hong Kong, and Taiwan now hold $586 billion and OPEC now holds $141 billion of our debt.

China has invested a large share of its FER (Foreign Exchange Reserves) in U.S. securities, which, as of June 2006, totaled $699 billion, making
China the 2nd largest foreign holder of U.S. securities (after Japan).

U.S. Treasury securities are issued to finance the federal budget deficit. Of the
public debt that is privately held, about half is held by foreigners.

As of October 2007, China's Treasurysecurities holdings were $388 billion, accounting for 16.8%
of total foreign ownership of U.S. Treasury securities and making China the second
largest foreign holder of U.S. Treasuries after Japan.

From March to October 2007, China's Treasury holdings declined by about 8%.

Agency securities include both federal agencies and government-sponsored enterprises
created by Congress (e.g., Fannie Mae and Freddie Mac) to provide credit to key sectors of
the economy. Some of these securities are backed by assets (such as home mortgages)

China was the largest foreign holder of LT U.S. agency securities, accounting for 54% of
total foreign holdings of these type of securities.

It is not clear, however, to what extent these investments have gone into U.S. sub-prime
mortgage securities, but they may be extensive. For example, the Bank of China reported
in October 2007 that it held $7.5 billion in sub-prime U.S. asset backed securities as of
September 2007.

As of June 2006, China held $15 billion in corporate asset backed
securities; if China held any sub-prime mortgage backed securities, they would likely be
included in this category.

Sources:
Global Insight, Country Intelligence: China, October 2007

U.S. Treasury, Report on Foreign Portfolio Holdings of U.S. Securities as of June 30,
2006, May 2007, p. 9.

In 2000 foreigners held $1.1 trillion in U.S. government debt. Currently, foreigners hold over $2.4 trillion in U.S. government debt (Treasury Securities).

The U.S. financial industry is now completely saturated by foreign investment and relies on foreign investment in order to operate.

I worry about much control foreigners have over our debt and as a result, control of our economic independence.

We have our grand government to blame for this.

All parties are to blame. Even the American people are to blame.

It is time to take back our country before we lose it to forclosure by those who hold the note. China, Japan, and other foriegn interests.

I'm sure after the government has bailed Fannie & Freddie out and has put them on an even keel again, Republicans will cry and moan that Fannie & Freddie are competing with private companies and insist on privatizing them again; of course it will only be the profit-making venture that gets privatized, not the debt that rightly should go along with it.

The cycle continues and we never learn.

It is time to take back our country before we lose it to forclosure by those who hold the note. China, Japan, and other foriegn interests.

Sterling rhetoric. Now, how do you DO that?

One possible answer to your good question is that the US Government will do the same thing it did during the Administration of President Jimmy Carter: Run the US Government printing presses to print Trillions of Dollars.

The result then, as it would be now, was to create run-away inflation, that could cause rising interest rates to attempt to control inflation. The Prime rate in 1980s hit a high of 21.5%.

Of course the ramifications of high interest rates will further worsen the mortgage default rate...that is the real root cause of all of the current US Financial crisis; for which there is no known solution.

The Federal Government Spends all Federal Taxes collected per year. Monies needed beyond that, create the National Debt. Those monies are issued as a type of loan. The note holder receives U. S. interest, which is added to the U. S. Debt. Until the U. S. Debt is paid off, the required interest keeps on a higher track. Now you know why the treasury does not want to raise the interest rates. As the guys holding the notes will go after the higher interest rates. It is a simple case of Congress spending money they don't have. The present Congress spent about $4.5 trillion dollars over the last eight years, an historical amount, nearly doubling the Debt. Fannie and Freddy basically failed again, therefore the ego of Gov't. is at risk; a bailout is the only logical answer. All they have to do is start the printing press, no problem, more debt and needed interest. Keep in mind this is the second time that Congress has had to throw borrowed money after bad for F&F. If this was to happen to the average person, is it legal to use a printing press? I suppose the system will collapse, when the loans come due and there is no borrwers left. A good reference for some clarity above is "National debt.com", good luck.

It is my understanding that the Federal reserve is semi-private; the president appoints the leadership but supposedly has no further control (as if appointing the leaders isn't plenty of control). Did congress actually approve this, or is this yet another bailout by the Fed, without asking congress?

The double digit interest rates that will result will hurt, but the inflation will hurt even more. We'll
get 7% and inflate away 10%, then pay taxes on the 7% profit while losing 3%. So your 401K has taken it in the shorts, and now we'll inflate away the value of your IRA, too.

Well said.

Sorry, if you run a financial institution, it is your responsibility to only make good loans. This is a George Bush lack of oversight, short circuit the regulations problem. If he called his buddies on their sloppy management they wouldn't be happy, so he just let it bubble along until it could no longer be hid.

"The main goal of the Taliban has always been to cause the financial collapse of the USA."
YOU'RE ABSOLUTELY RIGHT AND I FORGOT ABOUT THAT.

Bush played right into his hand, didn't he. I remember a conversation I had about this very same concern several months ago and knew back then we were heading to financial ruin.

The T's must be laughing and rolling around in their caves at us. Damn Bush and his investor buddies!!!!!
Is anyone going to remind Bush of the T's insights? What does Bushie have to say now?

Vote with your head, vote with your heart. But please vote out every incumbent, in every election. DO NOT RE-ELECT ANYONE!!!

Problem: does voting out an old group of self-serving incompetents guarantee you won't simply have a NEW group of self-serving incompetents?

It's my understanding that the common stock is effectively wiped out. Here's what it on MSNBC right now:

Lockhart said in order to conserve about $2 billion in capital the dividend payments on both common and preferred stock would be eliminated. He said that all lobbying activities of both companies would stop immediately. Both companies over the years made extensive efforts to lobby members of Congress in an effort to keep the benefits they enjoyed as government-sponsored enterprises.

So this is essentially a bankruptcy, we're just not using the word.

What Archie Bunker called, "...yer tinkle-down economics."

Our government didn't lose this money the "privatized" Fannie and Freddie did. This is just more CEO malfeasance. The CEOs got fired, but we're still stuck with the problem they created.

THEY GOT FIRED AND NOT JAILED....ABSOLUTELY NOT THE RIGHT WAY TO MAKE THEM ACCOUNTABLE OR RESPONSIBLE.

Someone knows more than they are telling us. They should be forced to give up their luxuries...LIQUIDATE their assets...then throw them to the streets. They need some humbling experience and it certainly isn't doing this whole situation justice to us lay people.

When are we going to stand up and revolt??? WHEN???

Sorry, but they didn't get fired. They are leading the transition team for the new leaders. Kind of like the Bush administration is briefing Ms Palin on foreign policy. And I feel certain that they will get a big check for he;ping out under such trying circumstances.

The idea is to complete our destruction before Bush loses power. The common thread in everything Bush has done is to bleed the country dry; leave it broke and without an army.

IN TOTAL AGREEMENT CONDEW.
Bush was such an unintelligent choice to have such powers, or was it a choice??? FL still has me reeling over the vote count. Way too suspicious and obvious to the rest of the country, yet he still gets the position. Screwy!
The man (bush) cannot talk, cannot hold a decent conversation, seems confused in explaining himself and his actions, he is so not a good communicator or representative of this country. This just goes to show how things work in the political arena...don't make no sense!!!