The media portrays this as a "take-over" and it sounds like one more nail in the coffin of a flailing economy. The economy should be rewarded for this action.
This is such a strange story but I think it is a very, very "good thing". Basically, these agencies were created to make mortgage money available to people so they could buy houses. They were always backed by the good faith of the U.S. government but they raised their money by "selling stock" (just like they were a private company).
Well...
The stock has gone down so much that they can no longer raise money that way. So...the government is "buying them at a sale discount of over 80%". The news media reports it as a "take-over". In reality, the government would be silly not to buy up the remaining stock at these prices.
Would you pass up an 80% off sale?
And...
The $5 trillion of mortgages that the government gets for their purchase are almost all good. Very little of Fannie Mae and Freddie Mac's mortgages are sub-prime.
So...
Almost everyone, except those who owned the stocks of these two, will be rewarded.
Lesson: Don't ever put all of your eggs in one basket.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.