I know that it really isn’t a hostile one, but let’s be real. What is the federal government to do with the idea of being a mortgage lender? The federal government was never designed to operate in this manner. It’s bad enough that they’re the largest employer in this country.
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We as taxpayers are going to bear the burden of this decision by Henry Paulson and George Bush. I understand the reason behind the fact that Freddie and Fannie can not do the job, but to have the government step in is a little over the top. The two of them were created by Congress back in 1938 and 1970 to help support the housing market. Being a sponsor and taking over are two different things. Unfortunately our politicians can’t tell the difference. Senator Chuck Schumer, a democrat from New York said, “there is more flexibility on the part of the government to try and help the housing market,”
We see how well they helped the market when they were allowing anyone with a pulse to qualify for a loan.
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As for what the market thinks about this…
Mark Zandi, a chief economist at Moody’s Economy.com said, “Effectively, the federal government has now become the nation’s mortgage lender,” he said. “This takes a major financial threat off the table.” OK, maybe the rest of the financial sector will move forward from here, but don’t expect it anytime soon. I read this little tid-bit of information that Standard & Poor’s downgraded Fannie and Freddie’s preferred stock to junk-bond status, but reaffirmed the U.S. government’s triple-A rating after the Treasury department’s announcement. Go figure.
Analyst are predicting that this could cost taxpayers as much as $100 billion while the Treasury dept. tries to get a hold of the situation.
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All I have to say about this from a traders point of view is to stay away from these two companies and find something else to invest into. I do believe that we will see a rise in the financial stocks this week but who knows which ones will be the lucky dog or the lame duck. If you want to play this news, the only way that I could possibly recommend is to get in the financial ETF, symbol XLF.
Whatever you do, Please do your homework first since I’ve been known to make mistakes from time to time.
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