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Fannie and Freddie Getting a Break

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By : Paul Escobedo    99 or more times read
A couple of days ago, it was reported that the federal government is thinking about giving Fannie Mae and Freddie Mac a pass by eliminating billions of dollars in bad loans theyíre responsible for, basically giving them a chance to start anew. The bad loans would be placed in banks the government would create, and it would be their responsibility for trying to collect on them.

Iím thinking that would have been a great idea if it had concerned regular citizens in states like California and Nevada rather than bailing out Fannie and Freddie, who should have known better when these loans were being done in the first place, and should have stepped in with concerns way before they got caught up in the morass. That each one abrogated their responsibilities by basically saying it wasnít their responsibility to provide oversight to these lenders whose loans they were supposedly securing is insulting, to say the least.

It would seem to be in the best interest of the consumer to have both of these entities strong. Loaning money has been something that banks have been reluctant to do since the financial crisis hit, yet itís the only way that the economy is really going to have to recover. Maybe the good news about unemployment dropping (another figure thatís somewhat suspect) might stimulate them, but itís doubtful. But knowing that money they decided to try to loan out would once again be secure might stimulate things once more.

So, how much are we possibly talking about? Weíre talking close to $1.5 trillion dollars, which the federal government would then be trying to collect on. Collect from whom? Thatís an interesting question. How would the American public feel about the government coming after them for home loans that they couldnít pay, otherwise they wouldnít have been in trouble in the first place? How would it look for the federal government to go after some of these banks that gave out the bad loans, the same ones whom the government has given bailout money to? And, just asking, but how does it help the government to take over collection efforts for such a high dollar figure while trying to work through a health care reform bill that might cost around a trillion dollars, while owing countries like China other trillions of dollars, and while thinking about another stimulus package for America?

Maybe those are things theyíre talking about and arenít sharing with the rest of us. Itís something to think about, though; will the housing market really start to rally with a stronger Fannie Mae and Freddie Mac, or are there other issues that must be addressed, such as stemming foreclosures, before the government makes its final decision? What do you believe?
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