There’s some optimism that the uncertainty about what will happen with Fannie and Freddie has been removed by the Treasury’s move to put the companies into “conservatorship.” Mortgage rates declined on the news, and they could fall further. But the problem isn’t really mortgage rates, it’s the availability of credit. The Treasury plan doesn’t address that and is also not going to solve the problems of an oversupply of houses, increasing foreclosures, and falling prices.
The debate now is about what should happen next. Senator Chris Dodd told reporters on a conference call that he thought this was “all taken care of” when they passed legislation to give Treasury the authority to take over Fannie and Freddie. Back in July, Treasury Secretary Paulson said if he had the authority he wouldn’t need to use it. Paulson described that authority, “a bazooka,” a big gun he could show, but not have to pull the trigger. Now that the trigger has been pulled, some lawmakers are mad. Dodd has called Paulson before his committee this week. Should be interesting.
Comments
Dear Mr. Kangas
I have watched your show over the past 30 years, and developed a trust in your opions about the stock market. I don't understand how the government took control of FNM without giving the stock holders some kind of explaination, the government set up this company and had over sight and seems like should bare some responsiblity to these investors. On this basis are treasury bonds any safer.
Phyllis Georgeades
Tonight, NBR quoted a speaker from Wharton on various issues surrounding the F&F bailout. To this listener's ears, this struck me as simple "damage control" for Wharton to suggest that containing a much-needed housing correction is the answer, and reviving mortgage sales volume will somehow fix the crisis we're facing.
Excuse me, but where is Wharton coming from? Don't they realize the price run-up was a chief factor in the mortgage crisis now underway? It should be known that Wharton was denying a bubble even existed when real estate was rising uncontrollably. Wharton holds little credibility now, and should be called on their past predictions. I expected a bit more journalistic scrutiny here.