Haven’t we spent the last half century or so encouraging people to open up free markets and liberating them from the grasp of communism and socialism? Apparently, its not just the democratic candidates who now think government control is the remedy to all of our country’s ills.
Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.
The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
Did you catch that last part… not only are they considering having the government (in)effectively control the mortgage market, but you guessed it…. all the costs and more important… the loses will be born by American taxpayers (that’s you and me for those of you keeping score).
One interesting thing to watch is what is going to happen to Fannie and Freddie stocks now?
Shares of Freddie Mac plunged more than 30 percent and Fannie Mae’s more than 20 percent in the first hour of trading on Thursday. By the close of trading, Fannie shares had fallen nearly 14 percent, and Freddie shares had dropped 22 percent. It was the second straight day of declines for the companies.
You think they had monetary problems, insolvency issues and were battling a crisis before. The government comes out and says they are going to put the smack down on you and make your your shareholder’s interest virtually worthless… and guess what… you are watching a self-fulfilling prophecy in the making.
And let’s not forget this isn’t the government’s business in the first place. Free Markets = Free People. When you take the markets away, free people will follow. We’ve been preaching that to other country’s for decades… but I guess we’ve forgotten those lesson ourselves.
The irony in all of this is, it was government insistence on loosening credit restrictions and opening up homeownership to a greater number of people that started the whole subprime business to begin with. And it’s been government whining and election year pandering that has precipitated much of the current crisis.
2008 might just be the year the invisible hand died in America… to be replaced by a government weasels, of course.
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