Enough with Fannie and Freddie, already!
Well, they might finally drop out of the news now that the big turning point in the fall of the mortgage giants came and went with a hard-core government takeover Sunday. So, what does that mean, exactly? Apparently, the government is now controlling the companies that control most of the nation's new-home mortgages. And that's huge.
If these companies went under, the effects would be felt around the world; I get that. But this is far from a win-win situation, if such a thing even exists in the world of business. In some ways, the government wins: It gets $1 billion in preferred shares for every company it now controls, and it can buy up to 80 percent of each of those companies. Also, bondholders that have something coming to them are protected because their investments in those companies are now backed by the government. So far, so good.
But the Washington Post puts a little rain on this takeover parade: "There is no guarantee that the takeover will work, and it comes at a potentially massive cost to taxpayers."
Well, they might finally drop out of the news now that the big turning point in the fall of the mortgage giants came and went with a hard-core government takeover Sunday. So, what does that mean, exactly? Apparently, the government is now controlling the companies that control most of the nation's new-home mortgages. And that's huge.
If these companies went under, the effects would be felt around the world; I get that. But this is far from a win-win situation, if such a thing even exists in the world of business. In some ways, the government wins: It gets $1 billion in preferred shares for every company it now controls, and it can buy up to 80 percent of each of those companies. Also, bondholders that have something coming to them are protected because their investments in those companies are now backed by the government. So far, so good.
But the Washington Post puts a little rain on this takeover parade: "There is no guarantee that the takeover will work, and it comes at a potentially massive cost to taxpayers."
Yikes. And what sort of cost would that be, you ask? The only figure available at the moment is $25 billion, according to the Congressional Budget Office. But even that's not definite, and the estimate is likely to increase as the situation unfolds.
With all of this in mind, I have to wonder ... will the wins outweigh the cost?
With all of this in mind, I have to wonder ... will the wins outweigh the cost?
.jpg)
No comments:
Post a Comment