Freddie Mac and Fannie May bailout

[Embar Angylwrath]

Well, it happened this weekend. The two mortgage giants were seized by the feds. I think the plan is to open up the treasury and guarantee the mortgages, in the hopes they will become a solid commodity on the open market again. I have mixed feelings about this. I suppose the government just skipped a step and took over the companies before they failed (and they were probably going to fail), which leaves the government in a place they would have been eventually, except they did on their timeline.

Also, the shareholders are wiped out, which would have happened anyway in a collapse.

So even though this is something I'd normally be against, I think in this particular case, the government acted in the correct fashion.

[Klast Brell]

Corporate welfare is the American way. Shareholders sure benefit from this socialism.

[Rsak]

How do the shareholders benefit if they get wiped out?

[Embar Angylwrath]

Corporate welfare is the American way. Shareholders sure benefit from this socialism.

Too funny. You obviously haven't been paying attention to this story. Shareholders get nothing. Preferred shareholders also get nothing. The only entities protected are those that made loans to to the two companies.

If this works, the people who beneift for it will be those that get to keep houses, and those that are able to get mortgages, becasue right now, those two companies are just about hte only game in town.

Its one of the reasons that I don't have much of an issue with this. The people paying for it (the taxpayers), are going to indirectly benefit from it.

[Harlowe]

As long as our money is going into the right pockets, we don't seem to mind having the government digging into ours.

[Klast Brell]

If a common citizen gets financially screwed they lose their house.
If Fannie and Freddie get financially screwed the government bails them out. The shares don't go away. They still keep trading. They may be worth less because of the housing bubble bursting, but they will eventually be worth more again. Dividends stop for a while but resume when the companies bounce back. Hell right now is a great time to buy their stock. it's got no where to go but up.

[Kulaf]

Corporate welfare is the American way. Shareholders sure benefit from this socialism.

Maybe out of the goodness of their heart they'll call your loan.

[Embar Angylwrath]

If a common citizen gets financially screwed they lose their house.
If Fannie and Freddie get financially screwed the government bails them out. The shares don't go away. They still keep trading. They may be worth less because of the housing bubble bursting, but they will eventually be worth more again. Dividends stop for a while but resume when the companies bounce back. Hell right now is a great time to buy their stock. it's got no where to go but up.

Then sieze the opporunity and load up on the shares, if that's what you think. By your perspective, this is a great time to buy Fannie and Freddie. Are you brave enough to do so? No. Because you're rather unsophistaced in the market, and likely don't have the balls for it, even though you claim to see opportunity.

Or maybe you don't see opportunity for a great return on an investment. Maybe you're just running your mouth again with little understanding of the issue at hand.

Me.. I think its the latter.

[Ddrak]

It was absolutely the right call, and I think we're all fooling ourselves if we thing "small government" should override common financial sense in cases like this. They shouldn't be turned loose again either.

As for buying their stock, it's a gamble on whether they will be turned loose again and what the terms of that severance will be in terms of stock ownership.

Dd

[Embar Angylwrath]

Klast is kind of off-base about the 'ol stock thing. It's true that Fannie and Freddie stock are still listed.. but as for trading.. well, not so much.

Until the government decides how they're gonna carve up the company (and they will, it was too big and artifically affected the market by assuming too much risk), no real invester will buy the stcok, because it's a black hole as to what is going to become of the two companies. This wont get sorted out until well into the first term of the administration, and I bet it won't be addressed until the second term , if there is one.

[Arkaron]

So, the government is now the biggest loan lender in the nation?

[Kulaf]

Fannie and Freddie don't loan......they guarantee loans.

*edit* Well actually I should say that their main business is as a guarantor.....not a lender.

[Klast Brell]

And the government guarantees Fannie and Freddie.