Quote:
Originally Posted by Tim
Hello Frank Peter - it's good to see you back on the forum.
I agree about the $500 billion cost. I do think, however, that the cost of allowing them to collapse would be even greater, as the reverberations would be felt throughout the world.
The example of Freddie Mac and Fannie Mae are anomalies even within the United States. My primary concern now is that the old structure has not been destroyed. The amount of government control is much greater, but the breakup into smaller entities has not happened.
It is a missed opportunity.
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I have absolutly no idea why these companies even exist or had exist this way. Let the markets and private companies (banks) decide but also face the consequenses from this desicions.
It is their job to calculate risks of loans.
If you establish a public back up system beside a private banking system the whole systems changes and brings completly different results. I read years ago according to these ABS papers that they are secure because the US taxpayer will pay the bill in the end even if the housing market is a complete bubble
If i can transfer my risk i am clealry willing to take other risks than i would do if i have not that opportunity. At the end of the day we have a completly wroong allocation of money and resources.
I never really understood this unique US system and always ask myself that this must be the outcome because it makes sense to behave this way for every bank but not for the US taxpayer and not for the US as a country.