gurby

Why I Finally Bought Fannie Mae

I dread to here the phrase 'Taxpayers losing' as if it will affect them directly and as if they owe the tax paid. In reality the whole plan is to sucker investors at the expense of frivolous taxpayers who evade and over consume beyond their savings buying houses, TVs, cars, and everything they cannot afford.

Politics aside, and inspite of what Alan Greenspan and Warren Buffett have said, the initial FED's fannie and freddie bailout plan is indeed to essentially safeguard taxpayers and private equity(gamblers and greedy individuals) rather then genuine long term investors. Those who say it is sell out do not understand the real maths. Taxpayers stand to loose much much more if Freddie and Fannie are nationalize and not to mention the cascading fallout to mortgage/insurance markets and the trust people have in the administration to honor its GSE institutions. The markets(genuine investors) know this and therefore want more assurances from the govt that they will let the markets find the equilibrium rather then nationalize and leave investors with nothing. If the markets do not participant, the taxpayers stand to loose big time as GSE loans are clearly sovereign loans. The govt will have to come out with much more and with no assurance of getting back anything in return.

The other alternative of selling out to private equity with zero value to current investors will also be a fatal error. They will strip the companies take their profits and sell it. The markets and global investers will also loose faith in all the assurances the govt and Freddie and Fannie have given to invest more in these companies just a few weeks ago. The
trust once lost will take a long time to gain back. There is also no gaurantee that private equities have national or broader social concerns. Their priority is going to be their own stockholders, who essentially are again the markets.

The market is looking for firm and decisive actions to show that the govt is prepared to invest in Freddie and Fannie in the short term to shore confidence against the poor negative sentiments. Freddie and Fannie are not yet bankrupt and their business models are still relevant albeit in certain rough patches. with some short term help They have enough cash returns and expenses to roll over and navigate from the current crisis.

Time is of essence. The FED need to act fast and decisively.