Most of you don't know anything about Freddie Mac, Ginnie Mae and Fannie Mae and, to be honest neither do I.
But just a cursory perusal of the issues shows that, financially, we may be about to plunge into a deep stack of Doo-Doo.
Years ago these entities were created to help homeowners purchase and finance their home purchases. Initially there wasn't a "government backed" aspect to the plans. They were set up by the government but they're publicly traded. Ginnie Mae is a government owned entity and they are backed 100% by government insurance. Fannie Mae and Freddie Mac are exempt from state/local taxes and they're also exempt from SCC scrutiny.
But it changed when some of our Liberal senators decided that you and I should be on the hook to "back" all 3 of these plans. Congress then authorized an assumptive backing to the plans - kind of like the FDIC (eventhough right now the FDIC has liquidity of about $1.80 per $100.00 in reserves!)
This week the Fannie Mae troika has lost about 40% of their collective value.
That little gimmick by congress now has you and I exposed to $5 Trillion in losses! Consider that our gross domestic product is currently $14 Trillion dollars.
Congress even took these loans off the US Treasury balance sheet so that you and I wouldn't be privvy to knowing the shell game they're playing with our money.
The Wall Street Journal explains it all very succinctly and very clearly here:
|As opposed to GM or Ford, most Americans have never heard of Fannie Mae and Freddie Mac. Yet the insolvency of either mortgage giant would have far more profound consequences for every American taxpayer than the bankruptcy of those car companies. It's time Americans understood the price they could soon pay for the Beltway's confidence game with these high-risk" government-sponsored enterprises."These columns have warned about Fannie and Freddie going back to 2002, and our fate has been to climb a wall of denial and hostility. This week reality began to set in. The duo's share prices tanked nearly 20% on Monday on fears that their capital levels may not be adequate. They rallied on Tuesday as their regulator played cheerleader, but they sank again yesterday to prices in the teens, compared to more than $60 a share last October. Investors are saying that a Bear Stearns-like run on the companies is a real possibility, and they're right.|
From the Financial Times (UK)
|Shares in Freddie Mac and Fannie Mae plunged in frantic trading yesterday in spite of attempts by US regulators to provide reassurance that the two government-sponsored mortgage financiers remained on a solid footing.Shares in Freddie were down 22.03 per cent to $8 and Fannie's were off 13.78 per cent to $13.30 at the close in New York, their lowest levels since 1991.Other participants in the mortgage market, including Lehman Brothers, also suffered steep falls, although the overall stock market climbed.Investors were unnerved by a warning from Bill Poole, former president of the Federal Reserve Bank of St Louis, that the chances that a bail-out of Fannie and Freddie might be needed were increasing.Mr Poole said Freddie Mac owed $5.2bn (£2.6bn) more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules.Freddie Mac argues that such a measure does not reflect the economics of the company, which holds mortgages to maturity but has to account for them at today's market prices.Fannie and Freddie account for nearly three-quarters of new US mortgages, and their difficulties add to worries about the US economy.|
What can you do? Our politicians have gotten us into this mess but you must call your elected representatives and tell them to not support the $120 Billion bailout for these 3 companies in the sub-prime mortgage market. Fannie and Freddie Mac are on their collective backs already and the $120 Billion will just be funneled through these almost defunct entities.
Chuck Schumer, Barney Frank, Chris Dodd and their Liberal Ilk are touting these entities as virtually 'risk-free' investments to world wide investors. As the WSJ writes, "They're the arsonists posing as firemen while putting more dry tinder around the blaze."
Here is USA Today's take on the coming national nightmare.
This just shows you that we need to be more vigorous in shrinking our Federal Government's size and scope. The Left (Obama) wants to create a National Healthcare initiative (read that as "socialized medicine"). Social security, medicare, retirement funds are just a few of the programs that our Leftist politicians are lining us up to pay for.
As Mark Levin stated on his July 11th show, "We live in a soft-tyranny right now -socialist in nature. They're stealing us blind and picking our pockets the entire time."