No, they should have taken their heads out of the bloated ass and took a look at what was happening...their marketshare was declining rapidly yet they did not change their product one iota...they continued to produce the same cars with only minor cosmetic changes from one year to another...all the while foriegn competitors were improving their product - GM sought to improve it's bottom line by cheapening it's product and moving labor out of the country.

Here's mine: You don't help a drug (debt) addict by giving him more drugs (debt).

__________________
"bellum omnium contra omnes; atque in eo bello jus esse omnibus in omnia."
Thomas Hobbes

"Homo Homini Lupus"
Thomas Hobbes

One question, just how much money are we talking about? I know you say it's a blank check but someone, somewhere should have a fairly reliable estimate of what's going to be the maximum cost. Does anyone know what it is?

The maximium is round about 5 trillion US$, as much as I remember the dark twins just have about 1.6 % of that money availiable due to their own capital.

Do your own math and see how much it'll cost if a given percentage X of their guaranteed mortages were to fail.

__________________
"bellum omnium contra omnes; atque in eo bello jus esse omnibus in omnia."
Thomas Hobbes

"Homo Homini Lupus"
Thomas Hobbes

This blank cheque always existed. This legislation is, well, not a surprise. It's just a codification of the agreement that has always existed between these two institutions and the US government.

It's not nice, and I think they should have a liquidity for equity deal (effectively and progressively nationalising them). But the effects of reneging on this would have been absolutely catastrophic for the United States. It isn't just a question of what it would have done for the US housing market - though, that would have been serious enough. For decades these institutions have been borrowing money and receiving capital on the basis that they were backed by the US government. They were as safe as investing in US Treasury bonds, except they made profits and stonking great ones at that which made them very attractive. If the US government had waited until times got tough and said "Well... We've changed our minds, we're not going to honour our obligations" then investors would have flipped. Foreign investment into the US could easily have suffered a big knock, as the very basis of their investments have been challenged by the US government - the organisation in the US responsible for ensuring that foreign investors get their money when they want it back.

It's a crappy situation, but anything different would have caused a massive crisis in the world economy.

__________________
"Capitalism is the astounding belief that the most wickedest of men, will do the most wickedest of things for the greatest good of everyone."

- John Maynard Keynes

well heres how the journal sees it. Some of the bold for emphasis by me caught my attnetion and affirmation...its a bloody mess to boot...and going to cost every man jack of us.....



Housing Bill Hammers Taxpayers
July 24, 2008; Page A14
Combine a housing meltdown with election-year politics and the results were not going to be pretty. Add a crisis in confidence in Washington's favorite quasipublic companies and what we're getting is a rout for taxpayers, especially those who kept their heads during the housing mania.

The House yesterday passed a housing bailout by 272-152. The White House has thrown its reservations overboard and is begging to sign this boondoggle, despite the less-than-veto-proof majority. A few brave souls in the Senate are threatening a filibuster, which is where the last hope lies for stripping the most egregious and expensive provisions from this monster.

Even conservative estimates by the Congressional Budget Office say the cost for this bailout will run to $41.7 billion, with $16.8 billion offset by higher taxes. No one has any idea of the real cost. The most expensive provision gives the Treasury temporary authority to pour money into Fannie Mae and Freddie Mac. The CBO says this could cost $100 billion, or it could cost "nothing." So it threw a dart at the wall and assigned a $25 billion price tag to the Fan and Fred bailout.

Likewise, the bill's $300 billion to refinance and insure distressed loans through the Federal Housing Administration will supposedly cost just a few billion dollars. That assumes few homeowners and lenders will sign up for the program because lenders will have to take a 10% haircut to be eligible. If no one needs this program, why is it there? If lenders do take advantage, they're bound to dump their worst loans on the feds. So as with the Fan and Fred bailout, the FHA guarantee will be either superfluous or much more expensive than we're led to believe.


Alongside these big-ticket items, we suppose the $4 billion tax credit for first-time home buyers, or the $4 billion in "community development" pork grants, or the $180 million for housing counseling are merely routine outrages.

On the other hand, the kid-glove treatment of Fannie Mae and Freddie Mac is very much worth worrying about. On the floor of the House yesterday, Democrats argued that this bill was the least Congress could do "for the people," given the way the government had "helped" Bear Stearns. The cost borne by Bear Stearns was having its shareholders all but wiped out and half its employees pink-slipped. Countrywide was likewise sold at a fire sale price. Not so these two government-chartered giants.

Fannie and Freddie may well be too big to fail, as Treasury Secretary Hank Paulson keeps reminding us. That is true in large part because they were allowed -- no, encouraged -- to grow like Topsy while Congress shielded them from oversight. At a minimum, the cost of a lifeline ought to include some accountability and assurance they cannot get into such a fix again. Instead what we have is a promise that Fannie and Freddie will pay us Tuesday for an explicit taxpayer guarantee today. The Treasury will get unlimited authority to recapitalize the mortgage giants, effective immediately, while a new regulator will have to run a gauntlet of confirmation and Congressional hazing over the companies' portfolios of mortgage securities the way a Supreme Court nominee has to handle Roe v. Wade.


This delay will give Fan and Fred time to consolidate their political position and fend off attempts to shrink them to a less risky size. At the same time, the $600 million "affordable housing" fund that the bill would skin off the hide of the two firms gives Washington a permanent stake in preserving their dominant market position. If Fannie and Freddie can't be brought to heel politically now, when weeks ago their very survival was in doubt, not even a newly empowered regulator will have any hope of reducing their claims on the public fisc once the dust settles.

Mr. Paulson might have kept an eye on the taxpayer's interest here by insisting that any money put into the companies come with some upside, as the Chrysler bailout in 1979 did. Instead we are left to trust that Mr. Paulson or his successor will have the political nerve to resist the companies and their friends on Capitol Hill. Any money given to Fannie and Freddie should have been conditioned on receivership, including clearing out the management and boards that made this mess.

Mr. Paulson argues that the new regulator will have the Federal Reserve's clout behind it, adding firepower to its ability to rein in the not-so-dynamic duo. But the Fed is also subject to Congressional sway, and no Fed Chairman is going to risk losing his running room on monetary policy to corral Fan and Fred.

For proof of how powerful they remain, even in their straitened circumstances, look no further than Majority Leader Harry Reid's refusal even to allow a vote on an amendment proposed by South Carolina Republican Jim DeMint to bar the two from lobbying in the future. Senator DeMint has threatened to filibuster if his amendment isn't aired. By itself, the antilobbying provision won't save the taxpayer from Fan and Fred, but it's a start.

Democrats are rushing this bill through because of the favors for Fan and Fred and new spending for left-wing activists like Acorn. But the reluctance of many Republicans to look out for taxpayers is harder to comprehend. They'll get little credit this year for letting the majority Democrats say they did something for "housing," and GOP voters will blame them for rescuing the irresponsible.

Meantime, the White House and Treasury are betting that this bill will put a floor under the housing market and buoy bank stocks, and thus avoid a deeper financial downturn. The rescue will only delay a housing market bottom, and it may or may not help bank stocks. The one certainty is that taxpayers are assuming a huge new risk.

Housing Bill Hammers Taxpayers - WSJ.com

__________________
No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

oh, and for those keeping a tally, McCain told them to pound sand......guess the mavericks’ still got some moves left. He was alos vociferously against the latest Subsidy bill, see floating our money to conglomerate agro biz's who make hundreds of millions with commodities at record prices..... Obama voted for that by the way, where does he stand on this one(?), as he didn't show up for the vote and not a peep has been heard, at least mccian laid it out there.
I am sure Obama will now tell us it may have been unwise or some other such thing if it goes south before the election, as he has not had to go on the record before hand....well done, another important issue hes was awol for... NOT ONE democrat voted no.....

McCain to Fannie Mae: Go Away
July 26, 2008; Page A8
In the rush to bulldoze the Fannie Mae-Freddie Mac and housing bailout bill through Congress this week, scant attention has been paid in Washington to how the U.S. system fell into this hole. Thus it was refreshing to see Senator John McCain step up and speak rude truth to his colleagues about the fiasco in an op-ed piece this week.

"Americans should be outraged at the latest sweetheart deal in Washington," the Republican presidential hopeful wrote in the St. Petersburg Times, stating the clear but all-too-often unspoken reality about this greatest of boondoggles. Yesterday 80 Senators voted to end debate on the bill. Only 13 voted against. That makes it all but inevitable that the bailout will pass today and go to the President early next week. Senator Jim DeMint has slowed the bill by requesting a commitment from his colleagues that sometime in the future, they would hold a vote on barring Fannie and Freddie from lobbying.

Senator McCain, who wasn't present for the cloture vote, also called for an end to their multimillion-dollar lobbying campaign. More importantly, he called for "making them [Fannie and Freddie] go away," as in, be no more. Receivership may indeed by the only option if a regulator can't get the far-flung activities of these two under control.

Politics today is endless self-calculation, but Mr. McCain deserves some credit for bucking the Washington consensus on this debacle. Barack Obama likely won't be in the Senate tomorrow for the vote on the bailout, but voters deserve to know whether he sides with the Beltway mortgage combines or taxpayers when it comes to Fan and Fred.

McCain to Fannie Mae: Go Away - WSJ.com

__________________
No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

Yes, indeed - well said.

There are numerous posts on this thread indicating a basic misunderstanding of the Freddie Mac/Fannie Mae situation. You raise several significant points.

Unlike the statements made in several posts, this is not an indication of what happens when capitalism goes too far. Rather, it is the result of greed and short-sightedness that is allowed to go unchecked because of the implicit assumption that the two companies are backed by the US government - a dangerous and foolish combination of government and the market that allows, and for a while rewards, dangerous risk taking.

When the government starts to interfere with the market on this scale, and the market happily and foolishly goes along, then risks are taken under the assumption that the government provides backing comparable to the backing of government bonds, as redflagboy says.

This was a dishonest and ultimately disastrous attempt to combine the partial nationalization of the mortgage industry with the appeal and profits of Wall Street. The word nationalization would never be used in the US, but that is what was involved. Democrats were more actively involved, but the GOP did nothing at all to address or help the situation. Politicians of both parties are responsible, as are the company executives.

Both companies bought some of the very same mortgage pools they were selling to others, thus participating in their own collapse. They had created something like a hedge fund, only it was set up internally. The loans purchasd from local banks were made up of mortgages of all types, including the sub-prime. They participated - and profited from - the greatest housing bubble in American history, and are now participating in the collapse. And now all of us are.

It is certainly not possible, however, to allow the companies to simply implode. They are behemoths; investors around the world hold shares. The result of a collapse would be far worse than higher taxes: it would precipitate a financial domino effect that is unpredictable and as much based on emotion as it is on hard data.

In 1931, the Credit Anstaldt in Vienna was allowed to collapse, and that failure of a significant bank was enough to make the depression much worse throughout Europe. One collapse leads to another.

Willem Butier in The Financial Times is the man to read on this, if anyone is interested.

__________________
"Our fears in Banquo
Stick deep; in his royalty of nature
Reigns that which would be fear'd: 'tis much he dares;
And, to that dauntless temper of his mind,
He hath a wisdom that doth guide his valour
To act in safety."

Macbeth 3:1

I was sleepy.

Seriously, think of Herbert Hoover. I'd rather take the somewhat gag-inducing step of public bailout than having the entire economy collapse, thank you.

Benjamin

__________________
To announce that there must be no criticism of the President, or that we are to stand by the President, right or wrong, is not only unpatriotic and servile, but is morally treasonable to the American public.

President Theodore Roosevelt
1918

I whole heartily agree, it is nothing but a farce....Not only are we allowing corrupt business to get free passes, we are allowing people to make bad decision choices and then bail their ass's out. When is enough, enough? The businesses need to be investigated, people fined/loss of jobs and/or jailed.
The morons that financed new homes without selling their old ones need to be bitch slapped and made to suffer for being an idiot.
The tax payers are being pumped enough, soon we will all be paying 50% of our wages to taxes.....How the fuck our we to survive then?
I feel for our grandchildren and great grandchildren.....Hopefully they will have the balls to take back the government, something we are failing miserably at today !!!

__________________
Anyone who thinks freedom comes cheap, please put the blindfold on and stand against the wall.

Many times I believe Americans will have to take back the country and start a new government.

I disagree. Between welfare, credit card misuse, bankruptcies and the many other crap protection programs; we pay big money to protect individuals and businesses and created a false economy for decades.
It is time that people pay the piper (so to speak) in order to protect our future, and if that means we crash for a little bit, then so be it. I'd rather experience a small crash now, then to hit rock bottom later.

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Anyone who thinks freedom comes cheap, please put the blindfold on and stand against the wall.

Many times I believe Americans will have to take back the country and start a new government.

I have to disagree.

The idea that some businesses are "too big to fail" goes against the most basic tenets of capitalism. People invest in these businesses expecting to see a return; that return is a function of the risk that they are experiencing by investing in said business. If there is no risk, there should be no return.

I wonder where those who claim to be capitalists are. They should be screaming at the tops of their lungs, for this is truly redistribution of wealth by the government, nothing more.

__________________
When they come a wull staun ma groon
Staun ma groon al nae be afraid
Thoughts awe hame tak awa ma fear
Sweat an bluid hide ma veil awe tears

so, redistribution of wealth by the government a bad thing?

__________________
No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

Depends on who you ask, doesn't it?


Good job at missing the point (again), though!

__________________
When they come a wull staun ma groon
Staun ma groon al nae be afraid
Thoughts awe hame tak awa ma fear
Sweat an bluid hide ma veil awe tears

Only in cases where that failure is protected against by government bailouts. Otherwise, ANY business of any size can fail. And if it does, well, them's the breaks.

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Not a day goes by that I don't see something that reinforces my belief that people are idiots.