What Happens if we don't save Freddie Mae and Mac?

A collapse of our economy, much worse then the stock market crashing, which is bad enough.

That's a very simplistic way of looking at this. Some unethical practices took place, yes, but if these programs aren't saved, then less and less people will be able to get into homes. Most banks can't keep real estate loans on their books because it ties up too much capital. They sell their RE loans to Freddie Mac and Fannie Mae, which combined back over half of all the real estate loans in the country, approximately $5 trillion I believe.

It's not that simple in this case. If we don't save Fannie Mae and Freddie Mac we are doomed.

Fannie and Freddie guarantee $5 trillion worth of mortgages and are HIGHLY leveraged.

Both Fannie & Freddie as well as the rest of the federal government rely on foreign investment to keep going. Many foreign investors are not savvy to the point of Fannie and Freddie not actually being part of the government. If we let them fail, many foreigners will expect the US to default on it's 9+ TRILLION dollars in debt. Then the US doesn't get to borrow any more money. It would truly sink the US economy and possibly the world economy and end credit and mortgages and we know them today.

This is truly a critical moment in US history. We have to been seen as doing enough to shore up both Fannie and Freddie. Otherwise foreign investors and governments will lose faith in the US, in the dollar and our debt. When we run a deficit of $400-$500 billion a year, we can't afford to do that right now.

to paraphrase Ghostbusters - It would be bad.

good luck!

I agree. In fact, I believe that at one time the government swore they’d never bail them out. However, there’s credence to the other point of view.

It’s helpful to understand the mortgage industry. Once a lender makes a loan to an individual, they often sell that loan off to another entity. It gives them more cash to make loans in exchange for another company making interest off your loan.

Freddie Mac & Fannie Mae own roughly half of the mortgages in this country. We’re talking about $6 trillion. The logic in rescuing them is that if they go under, you can pretty much kiss our current system of credit goodbye, which would essentially destroy our economy.

Of course it is going to be saved. Fannie Mae & Freddie Mac are ran by our beloved government.