July 10, 2008
That’s right; it’s TRILLION, with a capital “T“. If you have watched any news at all for the past three or four days you will know that Fannie Mae and Freddie Mac, two government sponsored mortgage lenders, are in very serious financial trouble. It’s been quietly building for quite some time now with just an occasional mention by the media. Bloomberg published this article on the impending disaster today, July 10, 2008. Their woes are a direct result of the mortgage melt down that claimed Bear Stearns, and what will probably be many more before it is finished. The biggest problem with Fannie Mae and Freddie Mac is that they have about $12 trillion in outstanding home loans (debt), and they are responsible for about half of that, or $6 trillion.
First, let’s point out that the current total US debt is well above $9 trillion. Even the best estimates is that it will take us about 75 years to pay that off, and that’s only if we start balancing our federal budget by 2010 (we all know that won’t happen) and raise our tax burden by a substantial margin; otherwise it’s anybody’s guess how long it will take. Now; if we have to add another $6 trillion to that to cover Fannie Mae and Freddie Mac, our government will have little choice but to declare bankruptcy. In fact, there are many experts in the field that say we are already bankrupt, we just won’t admit it. If not bankruptcy, we will have to find some sucker country to loan us the money, in which case will eventually cost us as much as $20 trillion with interest, etc.
Second, let me debunk all those out there that are going to say the federal government and us taxpayers will not be held responsible for Fannie Mae and Freddie Mac. Even Wikipedia implies the government is not responsible. That’s a bunch of crock. Yes, I am aware that in 1968 they were converted into a private corporation with share holders. But the two are still government sponsored companies, which means the federal government basically stands behind them. And don’t think for one moment that the corporate management and share holders don’t know that. Otherwise, why would they ever fund $12 trillion of debt? No fat chance. You can find plenty of supporting documentation on line to confirm that we taxpayers will foot the bill, and “What Do Fannie Mae and Freddie Mac Do” is one of them. Under “Do I have anything at stake in this issue”, you will find the following paragraph; “As a taxpayer, on the other hand, you have a cause for concern. The low borrowing costs of the GSEs is based on implicit Government backing for their $3+ trillion of debt and guarantees. If the GSEs ever have a financial disaster, the Government will have to bail them out and you and I will be on the hook for the cost”. GSE stands for “Government Sponsored Enterprises”. And I should point out that in 2003 (when this article was published) the two mortgage companies were only $3 trillion in debt. What private company would ever allow even that much debt to accumulate if they knew the government was not going to bail them out?
One thing we can all bet on; a lot of people have become extremely wealthy with the raping and pillaging of these two companies. And you can also bet they will not pay their fair share of the tax dollars that will be used to bail out the two companies. That’s the way the “supply-sider” politicians have set it up. And we, the real taxpayers of this country, have greatly aided them by saying “I don’t care, they are my political party and anything they do is OK with me!” Congratulations supply-sider supporters; you have helped put the last nail in our coffin.
UPDATE: I had prepared this post for earlier publication, but updated it this morning, July 11, 2008. This brief report, and others, are saying The New York Times is reporting that the government is considering “taking over” Fannie Mae and Freddie Mac. A senior Bush administration official has said Bush is considering a plan for the takeover. Anyone care to “debunk” me now that we middle class and lower class taxpayers will not be saddled with the bill created by the supply-siders?