For general discussion and debate. Possible talking point: Should the government takeover/bailout the two largest federal mortgage insurers?
Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday. The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis...Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt. Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
Treasury Secretary Hank Paulson just said that this is nonsense, but rumors are flying around Wall Street that this is imminent. What say you, NewsBusters? Is this a good idea to shore up the lending industry, or should troubled financial entities be allowed to fail in order to discourage risky behavior in the future?
