I am fascinated with the Fannie Mae & Freddie Mac bailout. As a Treasurer for a Habitat for Humanity affiliate I have an above average interest in the market for poor quality real estate loans. We were the original sub-prime lender. This bailout will allow Fannie Mae & Freddie Mac to corner the market at bad loans?! Is that the plan! Now imagine that you are in charge of investments for a retirement fund. Would you buy Fannie Mae or Freddie Mac securities? How much of a risk premium would you require? Why would anyone over the age of sixty own any Fannie Mae or Freddie Mac securities? I think a lot of people are going to sit on the side lines for a couple of years.
It does not take a whole lot analysis on the subject before you come to the conclusion that passing this bill could ultimately determine Bush’s legacy for historians. It has the scandalous overtones of the oil for palaces scandal and the near sightedness of the Smoot-Hawley Tariff Act. The Wall Street Journal has been screaming to anyone who will listen that this bill is a really bad idea. Bush has the opportunity to be remembered like Hoover.
Over the next couple of days I hope to write about the difficulties of buying houses in poverty areas and what I see as strange dealings and complications of the bill. G’day mate! 😉