Fannie Mae & Freddie Mac Finally Fall

After weeks of rumors and speculation, the two troubled mortgage giants fell. The Federal government took over Fannie Mae and Freddie Mac on Sunday (Sept. 7, 2008).

Summoned to separate meetings on Friday with Treasury Secretary Henry Paulson and other top officials, the two mortgage giants were told they could either agree to a government takeover or one would be foisted upon them.

"We have the grounds to do this on an involuntary basis, and we will go that course if needed," Mr. Paulson told senior executives at the two companies, who had little idea such a move was coming, according to three people familiar with the meetings.
- Wall Street Journal

However, was it really the right thing to do? The Journal said that there was no fear of an imminent collapse.

There was no dramatic trigger, nor was there fear of imminent collapse. Instead, the sweeping government intervention stemmed from a growing realization by Treasury and Federal Reserve officials that the two companies couldn't survive in their present forms, and that any collapse would be devastating to the economy.

Basically, the takeover was because the Fed's felt the public had lost confidence in the two companies. The cost of this bailout is estimated at $200 billion, so again, I ask, if a collapse wasn't imminent was such an expensive bailout (at taxpayer expense) wise?




---
go ahead share your thoughts with me now.

Get Paid to Sign Up, Refer Others, Read E-Mail, Complete Offers, and More!