US government takes over Fannie and Freddie, leaves a lot for the next President to resolve

[w¡n9Nµ7 §£@¥€r 123]

The Bush administration seized control Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, aiming to stabilize the housing market turmoil that is threatening financial markets and the overall economy.

Treasury Secretary Henry Paulson is betting that providing fresh capital to the two firms will eventually lead to lower mortgage rates, spur homebuying demand and slow the plunge in home prices that has ravaged many areas of the country.

...

Democratic presidential nominee Barack Obama issued a statement agreeing that some form of intervention was necessary, and promised, "I will be reviewing the details of the Treasury plan and monitoring its impact to determine whether it achieves the key benchmarks I believe are necessary to address this crisis."

On Saturday, Republican vice presidential nominee Sarah Palin said Fannie and Freddie "have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

...

Paulson said that it would be up to Congress and the next president to figure out the two companies' ultimate structure and the conflicting goals they operated under — maximizing returns for shareholders while also being required to encourage home buying for low- and moderate-income Americans.

http://news.yahoo.com/s/ap/20080907/ap_on_...e_giants_crisis

[IAMX 3,055]

At least Bush's friends are wealthy, received some nice no-bid contracts and legislation favoring their bottom line, and set up the problem for the next Presidency to BS it's way through in a similar fashion.

[Dan J 277]

If the taxpayers will be ultimately responsible for well being of freddie and fannie, it should remain completely under the governments control.

I'm not a fan of government bailing out banks or other private organizations without some significant strings attached. It just sends the wrong message.

[w¡n9Nµ7 §£@¥€r 123]

If the taxpayers will be ultimately responsible for well being of freddie and fannie, it should remain completely under the governments control.

I'm not a fan of government bailing out banks or other private organizations without some significant strings attached. It just sends the wrong message.

Sure, but you have to weigh the impact of the social and economic disruption of a bank failure against the need to send the right messages to the market. You can't always do both, and sometimes you just have to blunt the disruptive impact of a failure.

[Dan J 277]

If the taxpayers will be ultimately responsible for well being of freddie and fannie, it should remain completely under the governments control.

I'm not a fan of government bailing out banks or other private organizations without some significant strings attached. It just sends the wrong message.

Sure, but you have to weigh the impact of the social and economic disruption of a bank failure against the need to send the right messages to the market. You can't always do both, and sometimes you just have to blunt the disruptive impact of a failure.

I agree. In some cases the economic cost of failure will be greater than the cost to taxpayers.

[w¡n9Nµ7 §£@¥€r 123]

Treasury Secretary Henry Paulson decided to take control of Fannie Mae and Freddie Mac after a review found the beleaguered mortgage-finance companies used accounting methods that inflated their capital, according to people with knowledge of the decision.

...

Morgan Stanley, hired by the Treasury to probe the companies' finances, concluded the accounting, while legal, enabled Freddie, and to a lesser extent Fannie, to overstate the value of their reserves, according to the people who declined to be identified because the findings are confidential.

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide