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How does a Bailout help? and if it were you in trouble...?
Where is your bailout? Back to Fannie and Freddie...let's see, the idea is to save them from Bankruptcy. If they had gone bankrupt what would have happened. Oh, people would not have to pay their mortgages and we'd all have free houses.
Isn't that what happens when we Declare bankruptcy? But no, instead the people we put in charge to "take care of us" decides to take the money we gave them (in taxes) and give it to the people we are paying every month anyway to live in our homes.
This sounds really stupid to me. What am I missing?
1 Answer
- Rush is a bandLv 71 decade agoFavorite Answer
Two major points.
First, just because Freddie or Fannie went bankrupt wouldn't make those mortgages go away - those are a bank's assets. Those payments that you and I make would be considered assets and another financial institution would buy them and make you (and me) pay.
Second, although not part of the US government, many foreign investors viewed those companies as backed by the full faith and credit of the US government. If the government let Fannie or Freddie fail, they wouldn't consider Treasuries to be good investments any longer and then we couldn't run deficit spending because there would be no one left to borrow from - or the cost of that borrowing would become prohibitive.
Really sounds like you need an Economics 101 class to me.
good luck!