Tuesday, July 22, 2008

Cost of Fannie, Freddie Rescue - $25B

Once again a company comes hat in hand to the goverment for a bailout. Why is it that the government will constantly bail out these companies that practice horrible business practices yet the homeowner who got in over his head should take some personal responsibility?
The Congressional Budget Office on Tuesday estimated that a government plan to stabilize mortgage giants Fannie Mae and Freddie Mac could cost government coffers an average of $25 billion.

CBO's $25 billion cost estimate is an average based on "the path of housing prices in the next several months." They considered three scenarios: prices stabilize, grow modestly or decline steeply.

The CBO report came out a day or two before the House is expected to debate and vote on a rescue plan proposed by Treasury Secretary Henry Paulson last week. Paulson asked Congress to give the Treasury broad, but temporary powers intended to provide a liquidity and capital "backstop" for the two government-sponsored enterprises (GSEs).

Paulson requested that the Treasury be allowed to offer Fannie and Freddie an unlimited line of credit for 18 months and be given authority to buy stock in the companies if necessary.
Where is the credit line for the average taxpayer who can't make ends meet? Where is the ability to file bankrupcy and start over. Oh thats right those laws were changed to benefit the credit card companies.

Why is it that some companies are deemed too large to fail? Why aren't those companies deemed too large to fail held to a higher standard if they may be coming to the government for a bailout? These companies know that they can do almost anything even skirt legal standards and NOTHING will ever happen to them. You and I will be forced to open our wallets and bail them out while those at the top of those companies are allowed to keep there excessive bonuses.

It is time that government bailouts come at a price for these companies. We must demand the bailout be a loan at prevailing interest rates and we must demand that those at the top help finance the bailout with lower profits. The goverment should become a major stockholder and should share in any future profits.

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