Fannie, Freddie and the Pending U.S. Economic Disaster

Fannie Mae and Freddie Mac are in deep poop!

Most people have no idea what this actually means to the economy or to their wealth.

Here’s an article detailing the latest in the saga of these mortgage giants:

Fannie and Freddie: A Run on the Bank?

excerpt- “Early Friday, their plunge accelerated — Freddie shares were off another 33% at one point, to $5.40, and Fannie down 29%, to $9.31. And down with them went the stock market, with the Dow Jones industrial average shedding more than 200 points, to dip below the 11,000 level at one point, the first time that has happened in two years.

Later in the day, rumors that the Federal Rserve Board might seek to aid Fannie and Freddie, as it previously has intervened with some investment banks, calmed the market. The Dow Jones average regained half of what it had lost, closing on July 11 at 11,100, down 1.1%. Fannie’s and Freddie’s shares bounced off their low points as well. FNM closed at $10:25, down 22%, and FRE at $7.75, down 3%. But extreme swings in the stocks are clearly still possible as traders react sharply to every news development.

Fannie and Freddie are crucial to the smooth flow of everyday American life. They are the cement that holds the nation’s housing markets together. The companies buy home loans from banks that issue them, repackage those loans as bonds, and either hold them as assets or sell them to the public. Roughly 70% of U.S. home mortgages pass through the hands of Fannie and Freddie. Together, they own or guarantee $5.2 trillion in mortgages. Without Fannie and Freddie, it could soon become all but impossible to buy or sell a home.”

This situation is really ugly no matter how you look at it.

As we can see, it will be nearly impossible for most people to buy or sell a home if Fannie & Freddie are not bailed out.  This is obviously a disaster for the U.S. economy.

If the Fed DOES bail them out, think about how the Fed gets the money to do this: right from our pockets! The Fed will simply print several billion more dollars and hand it over to Freddie & Fannie. Those dollars devalue the dollars in your bank account. The money was stolen right out from under your nose!

Option A (no bailout) leads to a complete and total economic meltdown in the U.S.
Option B (bailout) leads to more inflation and the possible final blow to the U.S. dollar

Which road do you think the government is going to take?

Did I mention this is a good time to buy gold?

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3 Comments

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3 responses to “Fannie, Freddie and the Pending U.S. Economic Disaster

  1. ziz

    You mustn’t separate the man in Wall Street from his money.

  2. Pingback: Bank Failures: Are They Coming to a Bank Near You? « Finding Freedom and Escaping the Great Depression Part II

  3. Pingback: Bookmarks about Depression

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