Saturday, September 6, 2008

The Death of Fannie Mae and Freddie Mac?

Reports have been circulating that the both Fannie Mae and Freddie Mac will be coming under Fed Control soon. The question is why bother to bail out Fannie Mae and Freddie Mac?

Is the US government keen not to see Fannie Mae and Freddie fail? Why use billions of taxpayer's money to bail out corporations that have paid out large amounts of compensation money to their executives?

I would like to think that there are a few reasons why the Fed is going in to rescue Fannie Mae and Freddie Mac.

Firstly, simply too many funds are intertwined with all the bad debt. The Fed is in the habit of improving liquidity to boost the economy. They simply can't sit by and watch Fannie and Freddie turn turtle with billions of bad debt.

Ok. That's the only reason I can think of....

Why would they want to increase the ever balloning US national debt to rescue corporations like these? Sometimes, a recession is good as Jim Rogers says. It is a means of clearing out the forest so that new things can thrive

Anyway, when the stock market opens on Monday morning, I wonder what will happen to Fannie Mae's and Freddie Mac's stock price..

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