The Government Bailed out Freddie Mac and Fannie Mae

In case you haven’t noticed, the economy is teetering on recession, unemployment is at a five-year high, and home foreclosures are at an all-time high. And for once, it’s not only the little guy who’s feeling the pain. The largest corporations on the planet – Citibank, Washington Mutual, and Merril Lynch, to name but a few — have had to turn to foreign governments to bail them out. And these same banks have dramatically scaled back their lending practices to shore up their balance sheets.

The problem is, the US economy and everyday people desperately need the banks to lend money. Banks are the lubrication that drives the US economy. They not only finance large and small businesses, which in turn hire and pay millions of workers in the US, but they also provide mortgages and personal loans to everyday people like you and me. And over the past 12 months, they have dramatically tightened their practices, more or less shutting down the mortgage market while driving home prices lower. With less housing demand, builders have collapsed, laying off their workers. With less equity in their homes and higher interest rates, defaults have skyrocketed, with many people walking away from their homes.

That has had a ripple effect on the overall US and world economies. In fact, we are on the verge of wide scale economic recession and corporate collapse, which could take an economic toll never seen before (e.g., Trillions of dollars!). Without government intervention, the US economy could see a downturn on the order of the depression of the 30s.

Who the Heck is Freddie Mac and Fannie May Anyway?

Freddie Mac (“The Federal Home Loan Mortgage Corporation”) and Fannie Mae (aka “the Federal National Mortgage Corporation”) are private corporations formed by the US government to add “liquidity” … Read the rest