I know that many of the posts today in the major media and blogosphere will focus on the negative, that must sell more ads for everyone. Not me, I think this was the right final step to be taken by the federal government to provide calm to banks and securities markets ... and propel a major housing recovery.
First the negative types:
"This weekend Treasury Secretary Henry Paulson announced that mortgage giants Freddie Mac and Fannie Mae will be placed in a government conservatorship that closely resembles a bankruptcy reorganization. The move puts U.S. taxpayers on the hook for $5.4 trillion in outstanding mortgage debt and commits the government to provide as much as $100 billion to each company in capital commitments. Two months ago, the Congressional Budget Office estimated that the ultimate cost to taxpayers of such a move would be $25 billion. But bankers hired by the Treasury Department now estimate that $50 billion of taxpayer money might be needed to offset the Freddie and Fannie’s combined losses." From Morning Bell - Big Government Fails Again
"The fact is that the government has no business intervening in the housing market in the first place, unless it's subsidizing housing for low-income families. And it has even less business trying to keep house prices at ridiculously inflated levels at a time when the market finally is coming to its senses." From Asking for a Housing Bailout
"When the Paulson Plan was announced in mid-July, my initial reaction was:
It seems the plan is bad for equity holders, but good for debt holders ... and potentially bad for taxpayers ...
Nothing has changed." From Calculated Risk
One thought occurs to me, when the auto industry is suffering there are clarion calls for the government to step in and maybe even bail-out companies. When the steel industry is suffering we actually try to change international laws to protect our steel workers jobs from overseas competition. But, when government over-regulation and market hysteria about less than 10% of the mortgages creates a housing recession ... we demand straight up capitalism and government blind-eyes?
I'm open to the debate, but I firmly believe that the government botched this two years ago. This isn't the fault of too little regulation, this is the fault of too much government largess and manipulation. Time to right the ship of securitized mortgages, and then re-release the markets to perform.
Today rates finally began to fall back under 6%. Oil is sliding, and the dollar is strengthening. The stock and bond markets are positive. I guess that's enough for me for now. Housing recovery here I come.