Monday, September 8, 2008

Fannie Mae & Freddie Mac

Interesting how two pseudo-government agencies, are now owned by the US Government. Seems as if they were guaranteed by the Fed, that it would suffice. Of course not. Guarantees were only for a small amount of loans - which was the assumed risk factor. The guarantee was never for a system that was about to implode due to wild speculation being generated from Wall Street (for the rationale and map of this statement - it was covered months ago). The FDIC too was formed to give confidence to bank depositors - that security as we all know now was like a carefully worded insurance policy with many limitations and outs for the insurer.
OK, enough Monday morning rambling - what does this mean for you and me? Interest rates will come down - confidence in the market has just improved. Lower interest rates will boost home sales. And more loan products will eventually enter the market. The loans that are highly anticipated are short term loans for people who lost their homes to foreclosures. This is always the case after a downturn in the market. When that happens, the market will again begin to percolate.

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