Replies

To make a long story short, Fanny and Freddy own a large majority of the home loans in the US.( something like 90%). The taxpayer is on the hook to keep them alive. I'm making numbers up here cause I'm too lazy to look it up, but the numbers are staggering, something on the order of $65 trillion, or some such ridiculous number. If enough people stop paying their mortgage, Fanny and Freddie are toast, ergo we have to back all the bad mortgages. Also, Fanny and Freddy used to be blue chip type stocks that found there way into various retirement funds, mutual funds, and trusts. If they go belly up, police and teacher retirements are gone, college trusts are gone, more big financial institutions would be crushed, ect. Would the gubmint have bailout number 3? Who knows.

The point is, if they go under, America doesn't have the money to back them, in fact, there isn't that much money in the whole world to back them. America is still on the precipice of failure, no matter what anyone tells you. Just because the stock market opens every day and people trade, doesn't mean there is any money. We are broke. Pick your poison, Fanny and Freddie are just one aspect of the trouble the US is in. We are kicking the can down the road hoping that things will get better before the music stops and we have no chair. The president and the congress have NO CLUE how to grow a capitalist economy, so we are in deep pooh pooh until a real American capitalist gets in. Personally, I don't think we'll make it, but one can hope. The whole world is balancing on a knife blade, and failure of Fanny or Freddy would just about be our "Greece" moment. What everyone is doing is waiting for housing to "catch up" to the heady days of 2005-6. If that $300k McMansion could get back to $300k, instead of the $225k price they are now, maybe we could pull this hat trick out, but with 10% unemployment and little inflation,....probably not. Then of course, if inflation and jobs rear their ugly head, we will have an economy like Jimmy Carters,... 23% interest rates, and 12% inflation, due to all the money we are printing and spending as I type this.

It's just a symptom of the bigger problem that we are watching a 97 cent stock get delisted as it become worthless as an investment, yet we go to work every day, pay our bills, and purchase things, just as if things will go on as they always have before. The 97 cent price is set by the market place to represent what people think America is worth because Fanny and Freddie are basically representative of America's worth. When a stock gets under $5, many institutions aren't"t allowed to own such stocks, so, what happens now is anybody's guess.

Thank you very much for that response. It is quite informative.

Excellent, concise summary of the problem! I disagree only with one part:

“The president and the congress have NO CLUE how to grow a capitalist economy...”

I don't know about the Congress, but I believe the president has NO INTENTION to grow the economy. The only intention I can discern is to acquire more governmental control over every aspect of the economy.

“If they go belly up, police and teacher retirements are gone, college trusts are gone, more big financial institutions would be crushed...”

####

I have ALREADY lost ~90% of the value of my FNMA holdings due to the racist, and fiscally berserk machinations of the Democrat Party and one felonious Franklin Raines.

I’m not sure what investment difference it would make to those institituions and pensions if the value goes to zero. We are almost there now.