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The rumors are running on high level talkers now as Rep. Barney Frank, the chairman of the House Financial Services Committee has gone on record stating that there are serious plans in the works for the government to step in and place both Fannie and Freddie into a conservator-ship very soon. Both companies are loosing billions of dollars each quarter. With banks closing and mortgage companies closing Fannie and Freddie have been fronting better than 50% of the mortgages for this year alone with some reports pegging that number closer to 75%.
These are seriously scary times if you are an investor in the mortgage companies as many fear that once the government puts Freddie and Fannie into conservator-ship that any value that their stocks had will be toast. It looks like however that the government may have no choice as there are estimates that since June of 2008 there are approximately 9 million mortgages that are behind on their payments. I don’t know about you all but that is an insanely scary number.
There is another scenario that is being publicized a bit from a lesser known presidential candidate known as Bob Barr. He had some classic quotes over the past weekend regarding the Freddie and Fannie debacle. Basically he states that it’s time to privatize these companies and sell them off. Tax payers can no longer afford for congress to treat the US government as a national soup kitchen that will continuously bail out businesses that are in financial distress. Honestly when I read this and I did a little research on this situation this scenario actually makes the most sense to me as a tax payer anyway. Unfortunately like presidential campaign of Bob Barr the concept of privatizing the Freddie and Fannie does not get all that much press time.
As I see it we are all responsible for this mess that we are in and I don’t see why the government should bail out these companies. They sold us on the idea of living on credit and pay later, get what you want now and will bill you for it later. Obviously as a global economy there is a large portion of us that are not either mature enough or responsible enough to live on credit. Honestly you should not be aloud to have credit unless you have the financial savings to back up the line of credit you want. Not stuff but actual liquid assets that can replace the credit you borrow if you happen to not pay your debt. Now this is just me ranting an idea but I think it’s pretty obvious that there is a good portion of the world’s population that needs to learn how to work with credit and not live on credit.
What are your thoughts on the whole Freddie and Fannie crisis? Who do you think the responsibility should fall on, the companies the people or both? What do you think is the best way to fix this crisis, the government way or privatization? Please share your opinions and thanks for reading.
