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Fannie Mae is asking for another $8.4 billion dollars because it still expects its losses will continue because of the trends of the housing market. Should they be allowed to recieve more money from the government?
here is the link: http://money.cnn.com/2010/05/10/news/economy/fannie_earnings/index.htm?source=cnn_bin&hpt=Sbin
I don't see why Fannie Mae (and Freddie Mac who also asked for more bailout money) wouldn't ask for more money after they were basically written a blank check the last time. If there is free money available to them and they have such a strong tie with the government then they will undoubtedly continue to ask for more and more money until the economy turns around or they become a government owned entity in which case they will not even need to ask.
ReplyDeleteAshlee brings up a good point about these partially public /partially private companies. The government will not or cannot let Fannie Mae and Freddie Mac fail, therefore the two companies have every incentive to continue to ask for money. I think this will make the companies sluggish in investments and limited in longterm growth opportunities if they lack the motivation of a privately held company to be competitive in a free market. Imagine if McDonald's asked for government aid everytime it had a bad quarter instead of looking internally for ways to improve. I believe Fannie and Freddie will not be able to exist longterm in their current state. The companies will either need to become purely private or completely government owned.
ReplyDeleteIt reminded me right away of Professor McKinney handing us the basket full of money in our little game we played. We could have taken as much as we wanted but chose not to. I think for Freddie and Fannie their "roles" right now are good as they are being used by the Obama administration to support foreclosure prevention which I think is important but its that relationship we see again and its hard for Obama not to lend them the $8.4 bill. I'm curious to see how long it will take for Fannie and Freddie to post good results especially when their current holdings are being foreclosed, any guesses?
ReplyDeleteI think that the government will eventually give them the money that they want but I don't think that they should. But that is not an option since it is owned by government they will not let it fail as we have seen before. They should develop a plan to make it more solvent and eventually let the company fail and have the government salvage what they can. But then one of the big banks will buy it and come even more powerful.
ReplyDeleteDoes anyone think that the American people will eventually get annoyed enough with the government helping big corporations (The Big Three) and these big banks that they will eventually do something? I'm not sure how many more bailouts the government can give out. I do think they will end up giving a high percentage of that $8.4 million that was requested.
ReplyDeleteYikes, I'm not a fan of how big this bill seems to be getting with Fannie and Freddie, especially since the reports says that they've just been bleeding money for the last 12 quarters. Then again we've definitely set it up at this point so that we have no choice but to keep throwing money at them to try and keep the mortgage market stable.
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