U.S. throws 2 mortgage giants a lifeline

July 13th, 2008, 8:12 pm · 21 Comments · posted by Jon Lansner

Henry Paulson, Treasury secretary Fannie Mae and Freddie Mac, the two giant stockholder-owned mortgage buyers/insurers, got a bundle of government backing on Sunday after a week where their financial viability was in question. Here’s what you need to know about rescue plans for two companies that, in some ways, control about half the nation’s mortgages …

The plan involves the U.S. Treasury, in essence, likely investing in the two companies with the Federal Reserve offering up what amounts to emergency credit lines. (That’s U.S. Treasury Secretary Henry Paulson pictured right.) Read more, CLICK HERE!
Read Treasury statement HERE. And Fed’s press release HERE.
But don’t expect other financial firms to get such help. CLICK HERE for more analysis.
Bill Gross, bond guru at Pimco in Newport Beach, calls the plan a “bailout.” Read MORE HERE!
From the presidential campaign trail … Barack Obama’s comment (HERE) and John McCain (HERE.)
Just look at IndyMac Bank, and the mess that pushed it to failure on Friday. CLICK HERE for more.
If you’re an IndyMac customer, HERE IS what you need to know.
The rescue plan means Freddie Mac can likely borrow $3 billion from Wall Street on Monday. Read more HERE.
Latest stock quotes on Fannie Mae (HERE) or Freddie Mac (HERE)

And in related news…

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republicans are TRAITORS says:

July 13, 2008 at 9:24 pm

Republicans are such traitors. When they want your vote they tell you whatever you want to here. The republican communists shout Smaller government, Capitalism and no bailouts. In reality the are pro-communism, pro-taxes, pro-big government, and pro-big government.

If someone ever tells you they are a republican, make sure your wallet is still in your pocket.

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Christina says:

July 13, 2008 at 10:59 pm

Wow, can someone bail me out of the poor decision/investment I made in buying my home 3-years ago?

Seamus says:

July 14, 2008 at 5:18 am

Welcome to the start of the great depression of 2008.

If you think you heard that times were bad in the early 1900’s you ain’t seen nothin yet!

MrWizz says:

July 14, 2008 at 6:31 am

Looks like they just nationalized the mortgage industry!

Geezer says:

July 14, 2008 at 7:08 am

This is definitely a government bailout, but a necessary one. The Bush Administration is finding that its chickens are coming home to roost. Eight years of Bush regulators looking the other way while their fat cat supporters played fast and loose with the mortgage regulations brought us to this point.

Dina says:

July 14, 2008 at 7:21 am

FUBAR

Makesnosense says:

July 14, 2008 at 7:29 am

We can thank the 97th and 101st Congresses for this mess. They regulated the wrong part of the ARMs. “Don’t stop thinkin about tomorrow” - what a joke!

poker3677 says:

July 14, 2008 at 8:11 am

First of all… Freddie and Fannie WERE originally govt run. I would say from there they went “semi-private”, where they were publically owned, but gov’t backed. If this was a “bail-out”, then it was a bail out of the American Taxpayers who would have ultimately payed the bill had they not stopped the bleeding now. Try another news source people!

Kracker says:

July 14, 2008 at 8:53 am

WOW!!! a bail out.. Who’s Next…

lee in irvine says:

July 14, 2008 at 9:37 am

Oh my, look at what’s happening to the bank stocks today:

At 9:30 am

WaMu -30%
Wachovia -12%
Downey Financial -14%
Citi & BofA, both near or at decade low -4%+

Liar Loan says:

July 14, 2008 at 10:51 am

Lee-

I think everyone and their mom has jumped on the shorting bandwagon for bank stocks. If IndyMac can fail due to a run on the bank, then the first three you listed could easily be next. It’s easy money for momentum investors.

mortgagemaker says:

Wait, I though it was just sub prime, alt-a, HELOCS and 2nd TDs that were no good? If this doesnt tell you what i have been saying all along that it is not about the loan but the bad valuation of the collateral securitizing that loan that is the problem. The collapse of home prices is just begining.

OCTrojan says:

July 14, 2008 at 11:27 am

The purpose of the “bailout” is to prevent further erosion of the U.S. economy on a macro level. Yes, banks are benefiting from this goodwill act by the government, but so is the entire economy - the gov’t wants to avoid a collapsing domino effect.

I’m all against taxpayer supported bailouts of irresponsible industries, but sadly, this plague is now affecting all of us. If the gov’t does nothing, longterm credit will skyrocket which will completely freeze the real estate market, plunging financial companies into disarray as more and more banks fail as a result of public panic, feeding on the frenzy of news hyperboles. If anybody has a better solution besides “let the chips fall where they may”, then please post it. By the way, when the government did nothing, the Great Depression was the result.

Jason says:

July 14, 2008 at 12:15 pm

Obviously, “this is for the greater good” is the explanation that is provided for all government activity. That’s why the government does or doesn’t interfere with the free market in any given case. We should trust them to know just what to do, as well as when and how much.

But, when the same people who tell us that regulation is evil — and who exercise that belief by looking the other way for years — come back and say “we have to do this for YOUR benefit”, people are naturally skeptical and disillusioned.

We lecture the world about our mature and orderly capital markets, so by all means, let’s keep that illusion going for as long as we can.

July 14, 2008 at 12:27 pm

I dont mind the bailout - but figure out why it happened, not just bail out and dont have a clue as to why our housing market is collapsing.

lwps says:

July 14, 2008 at 2:17 pm

Joe and Jane get a check for $600 from Uncle Sam to help them avoid foreclosure. Freddie and Fannie get a $300 billion checking account to the US treasury.

nostrodomus says:

July 14, 2008 at 2:28 pm

lwps:
If the rebate check is a bad idea remember to donate yours back to the gov.

July 14, 2008 at 2:30 pm

A mortgage loan is a collateral loan, not a signature loan! - the colateral needs to be scrutinized more than any part of a loan. Credit and income are important, but if you have nothign behind the loan to collect on it, even the people with good credit and good income will stop paying, like we are finding out.

July 14, 2008 at 5:19 pm

nostrodomus-

We’re paying the rebate check back in the form of interest on the debt it created. Just remember, your children and grandchildren will be paying it back for a long time to come. But you’ll be dead so who cares, right?

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