Velshan

Fannie and Freddie Did Not Cause This Crisis

I notice many comments are totally out of touch with reallity.
The problem of Fannie was not that they lend to people who could not afford a mortgage.
The real problem is that Fannie borrowed very large sums of money on which it promised good returns but now cannot perform because Housing prices are collapsing.
Such borrowing was done by everyone in Mortgage business and all of them are in trouble now.
The most important question to ask is who arranged all this billion dollar funding. The answer is clearly the Federal Reserve, Treasury and its afflated Banks which continued to take in large Foreign money from various countries and the corrupted leaders of those countries.
It is very clear that the above instiutions needed to keep this money away from the respective Foreign Governments ($300 Billion from Russia, $1.5 Trillion from China, $600 Billion from Arab etc).
That Geo-political requirement needed America to have some place to invest in. But the growth in foreign economy was so fast that American Industries could not take on more investments. that was the reason for creating suddenly assistance for poor Americans to purchase Homes. Democratic fools were simply used by these American Financial elite. That is also the reason why they cannot afford to have people like the Maverick McCain become President and MAYBE default on Fannie or Freddie.
The most important question is, So why not let Fannie collapse and make all these foreign depositors go Bankrupt.
Why Paulson added word in the Bailout Bill to also guarantee foreign Banks who purchased Fannie's mortgages?
Why no media or political parties bring out this question?
The answer to these questions will show you the real reason for Fannie's problems.
But the answer will also expose America's economic tricks and strategies and also its weaknesses.
A HINT : That foreign money is actually equal to American "Investment" in all those countries. The American Financial wizards need China and Russia to release their currency to be floated on money markets. But they failed to achieve that. The American Financial crisis is the result.
GAME OVER.

Can Gold Be Suppressed Indefinitely?

The Gold was considered a safe commodity to keep as it lasts much longer. But that was when people used to own their own homes and land.

Today those who still have such luxury of own home and land such as common people in India still buy gold.

However almost all economies that are linked to American dollar based economy has higher number of people (such as Singapore) where majority of people only have mortgaged homes (on debt).

Their problem is to ensure their own ability to pay for their home mortgages. Keeping gold will not assist them in ensuring this ability. They thus have to invest in stocks or bonds that will provide them this ability (in interests or higher value). Gold being a commodity for stability (meaning stable price) is not an investment.

Thus I humbly warn anyone who wishes to "invest" in Gold, please ask yourself. Are you an investor such as that Indian who saves money in gold. Or an American in debt who needs an investment vehicle to earn more money?

Corporate Fraud + Government Intervention = Bailout Nation

You can blame the people who borrowed money and later found that they cannot pay due to loss of job or inflation or the non-arrival of expected pay rise.
Or you can blame the Banks who "borrowed" huge amount from Fed at very low interest and issued such loans without even proper vetting of clients (in sub prime loans - no details of employment and earning history were provided). Not because they hoped for repayment but simply to show "growth" to the stock market and shareholders. And of course can claim better salary package for the wonder kids of the Board of Directors.

Or you can Blame Fed who issued this funds to Banks at such low interest rates and allowed the rapid uncontrolled bad loans to common people thru credit cards and other loan issues.

What is real problem is that there is something seriously wrong with America. Fed reacted to that problem, Banks reacted to that problem. And common people reacted to that problem. And SOLVED the problem by spending. Because that is what the Government kept saying. Don't worry, keep spending. All will be alright.

The truth is our Financial Giants borrowed much more then they lend to our common people. They invested in huge industry building in China and Vietnam and around the world. Now they find that they cannot recover the money from this investments. Worst the output from this investments cannot be sold in America because American earning power has been stagnant and actually in real terms has been reduced.

To allow for the continued sales of their good from China and other investments, they gave away cheap credit to American people to spend. BUt for how long? what is next?

The real problem is our back boneless corrupt politicians (except Ron Paul ie.)

Fannie & Freddie: Myth vs. Reality, Part 2

What is important to any normal person about Freddie or Fannie is what it implies and what will happen to us, due to the fiasco.

First lets understand that Whoever is at fault and Whoever is the mastermind of all this debacle, is not really important. Because they probably are too smart to be caught. Or if they are indeed stupid will be caught and yet cannot prevent any of the consequences.

This debacle has happened due to actions by a very large group of people including the Politicians, Congressmen, Senators, Bankers, Ex-Bankers (or I should say, people who are still indebted with Banks but work in Government positions now), and a whole of financial consultants. (and of course the silent or biased media)

The importance of the above factors is that all this people are running our Government and I don't see they giving up their luxurious lifestyles because they made a mistake.

The mistake is
"Take available opportunity to create more money for yourselves". Is this a mistake? Not an easy answer right? Not important either.

What is the key development from this "mistake"?

The Building of so many Houses? For people who cannot afford it?
Not really. Because, if someone has already build a house for say, $100,000 dollars. He can keep the house for years until someone is ready to buy the house for a price above the cost.

But what if you have borrowed the money (say from China) with an interest that you can afford. No problem right. Just pay the interest and hope soon someone will buy your house for a price that now will include the interests that you have paid.

But what if you have not enough money to pay the interest and you still have not found the buyer? Then you go crying to the Government for help. And Government may keep you alive by giving you additional loans. Or buy all your houses at a fixed price.

This is the discussion that is going on. Instead of clarifying the actual value of the houses and interests that Freddie and Fannie are obligated to pay. The Government keep giving the "ALL is OK" speech.

While now, the owners of the Freddie & Fannie shares are beginning to wonder about actual situation and are selling of their shares at whatever prices that is possible.

This means, we all have to wait and see if American people can continue to earn enough money to keep paying the interest on money borrowed (yes that is from - China, Japan, Russia, among others).

And if American people will want to continue paying that money. If not then there will be serious problems between America and all those countries who provided that money.

The only solution is to simply let the company Freddie and Fannie fail. Then sell all the assets at very cheap prices to Americans at any affordable price and tell our lenders - "oops sorry. This is how Capitalism works".

But America as a super power and trusted Business and Trade partner will be gone. Dollar will be also gone. But Americans will not really lose anything. in fact get cheap houses.

It will wake up a lot of countries. But the World will be a better place.

Fantastic!...

[Note : I like the article posted by Questionable. His is right ]