At first Freddie and Fanny resisted these moves. They are publically traded companies and they knew taking on all this added risk was a poor choice. But then the silver lining appeared.
So as long as the interest rates were held low (once again, something only the Federal government can do), everyone could make money.
And boy, did everyone make money. Then they lost it.
These sorts of things never last. It was a Ponzi scheme of such epic proportions it would make Bernie Madoff blush. It has cost America hundreds of billions of dollars in bailouts, and there does not seem to be an end in sight. A 5 percent shift in homeownership nearly ruined our whole (hell, the whole world’s) economy. Was it worth it? What did it gain us in the end? Nothing.
What is the current administration’s answer to this problem? It is the exact same answer that the Clinton and Bush administrations had. Encourage more risky investment. Encourage the foolish decision to push more and more people into untenable mortagages in order to boost the economy. So much for breaking out of the old cycles, President Obama.
2 Comments
Re – greedy companies
I think people need to understand that the private sector exists to create profit and wealth and does not exist solely to provide employment.
To think of the private sector (as Mayor Daley and President Obama seem to) existing just to “create jobs” is ignorant and this in practice hampers wealth creation – which negatively affects everyday working joes as much as so called greedy companies.
Bernie Madoff blush… lol. I love it! Great Article! It is so sad that it is true.