Don’t Call it a Comeback

While you were doing other exciting things on Sunday like oh, paying your bills and taking down the recycling, some major stuff was being decided in D.C. about how the money you make this year will actually be spent.

Because that’s when Treasury Secretary Henry “Hank” Paulsen announced that our U.S. government is taking over FHA mortgage biggies Fannie Mae and Freddie Mac.  The government now adds Fannie and Freddie to a “bailout list” that includes Bear Stearns. 

That’s because Fannie Mae and Freddie Mac now own or guarantee $5.4 trillion of U.S. home mortgages, or about half the total outstanding mortgages in America.  Whoa.  Uncle Sam has pledged to fund Fan and Fred for up to $100 billion total for each company or if my math is right, a $200 billion dollar handout.  That’s a lotta cheddar.

The banks and mortgage giants of course claim they “can’t” give out more new mortgages because they are “pushed to the wall” financially by all the bad loans they’ve already made in the foreclosure free fall of ’08.   The government meanwhile really really wants you and I to have a home to grow old in.  That’s nice.  But unless you or I have 20% down (or generous parents) and a squeeky clean credit score, we’re kissing that way of life goodbye – and fast.

So Uncle Sam has decided (again) to give a ton of cash to an industry that has proven itself untrustworthy once already.  All of this in a desperate bid to reclaim our flagging mortgage market. 

And yet it doesn’t appear to be working so far.  Let’s hope that Fannie Mae and Freddie Mac don’t go the way of our earlier taxpayer assisted bailout of Bear Stearns – because I sure did not see any lowering of mortgage rates from the banking industry in the past 6 months since that happened, did you?  Sure it would be nice if, after receiving a truckloads of cash, these corporations would finally loosen their collective Brooks Brothers ties and start handing out the jumbo home loans like candy again.  But this year has shown us that mortgage companies are not interested in playing nice.  Instead, they prefer to keep all that wonderful money of ours to themselves – as something they like to call “Assets”.  Hmmm…..

And now Lehman Brothers is in trouble.  Something to do with ”$33 billion in distressed real estate securities”?  Um, wasn’t that a big part of why we bailed out Bear Stearns to begin with?  So that Lehman wouldn’t fall next?  You gotta love it when a plan comes together like this, don’t ya?

So should we trust that this latest bailout will really “fix” things?  Or should you and I just start working a lot harder so we can keep up with our obligations to the landlord and the U.S. financial market?  Would love to hear what others think about this one.

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