 merrie says: Guaranteed Mortgages Fannie Mae's exposure to the housing market has soared. Its outstanding guaranteed mortgages tripled from 1998 to 2007. Delinquency Rates The delinquency rate on Fannie Mae mortgages is rising. This increases the chance that the company will have to make good on its guarantees. Borrowing Costs Borrowing costs are volatile and rising, reflecting investor concerns about Fannie Mae's health. What Is the Reach of the Problems? Fannie Mae and Freddie Mac own or guarantee about half of the nation's $12 trillion mortgage market. Housing Markets They provide the capital that banks use to write new loans. If Fannie and Freddie stop buying loans, banks may stop making new loans, freezing the United States housing market. Financial Markets Virtually every Wall Street bank and many overseas financial institutions, central banks and investors do business with Fannie and Freddie. What Are the Consequences of a Government Bailout? Paying for Losses A bailout would potentially put taxpayers on the hook for billions to offset Fannie's and Freddie's losses. National Debt It would most likely make it more expensive for the United States government to borrow money in the future, since the government's potential obligations, which currently stand at about $9 trillion, would rise by an additional $5 trillion. Investors Suffer Shares of Fannie and Freddie would probably be worth little or nothing, I'm sure that defending the US economy is seen as every bit a patriotic duty as promoting freedom and democratic values in the world, so folk won't mind coughing up a bit more in taxes. Fannie, Freddie Deny Liquidity Problems The statements from the government-sponsored mortgage giants were released minutes after the Federal Reserve denied having discussions with the companies on allowing them access to the central bank's emergency discount window. "The Fed is following the situation closely," a spokesperson from the central bank told FOX Business. The statement conflicted earlier reports indicating Federal Reserve Chairman Ben Bernanke told Freddie that it and Fannie Mae would have access to the emergency funding. The financial health of the two government-sponsored entities was the focal point of a tumultuous day on Wall Street. Fannie insisted in a separate s... COughing up more in taxes would HURT the US economy not help. |
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