The big bailout of Fannie Mae and Freddie Mac has been big news this hebdomad . But what does it signify to you ?
GSEs —> TSEs?
For you, the borrower:
This could think ( somewhat ) low rate and neat availability of credit . F&F will now have the cash to bribe mortgage from other cant and make more mortgage backed securities to betray off to investors . That means those other banks will have the money to create more mortgage — that way of life there ’s more money be active about the system . So that ’s in force for a borrower . If you ’re a current mortgage bearer with a fixed rate , however , you ’ll likely see little modification .
For you, the homeowner:
Though home prices will proceed to fall , the bailout is a potential signaling for future stabilization of prices . That ’s good for the 1 in 3 mortgage holder whose current mortgage is worth more than his home . Some economists propose the market to bottom out as early on as the first quarter of 2009 ; most project early on - mid 2010 .
For you, the F&F shareholder:
We ’re not sure yet . Though Treasury Secretary Hank Paulson did make it clean that the TSE ’s " will no longer be manage with a strategy to maximise common shareholder issue . “ Sure , exchange the policy now that U.S. taxpayers are the tangible shareholders …
For you, the national Federal Debt:
The price of politics intervention has yet to be specify , but it will be huge . Upon putsch , we ’ve already immediately injected F&F ’s $ 6 trillion into the internal debt . Allegedly , a memo that has been recently circle among economists at the Federal Reserve see that Union debt could reach $ 23 trillion by mid 2010 . ( It ’s currently$9.67 trillion . )
For you, the everyday taxpayer:
Uh oh . As a taxpayer , you ’ll be footing the bill . The bailout essentially mean Fannie and Freddie will have an unlimited taxpayer - funded credit line . This does n’t mean our taxis will be increase to bail them out — at least not yet . But it does mean that now our government is further in debt — now indebted to hedge in funds , domesticated and international banks , foreign primal depository financial institution , etc . The government already put in $ 1 billion to F&F , and may put in up to $ 200B more .
And what if the bailout doesn’t work?
If the bailout does not bring home the bacon — that is , it does n’t help the housing or deferred payment market — well then we ’re in big trouble . If our government ca n’t inject liquidity into the market , guess who can ?
Be sure to translate more of what Diana learned todayhere .
