"cavelamb himself" wrote in message
m...
Ed Huntress wrote:

"cavelamb himself" wrote in message
m...

azotic wrote:

It appears the american taxpayer will subsidize the risks taken by
sophisticated investors.

http://www.reuters.com/article/press...008+BW20080711

Since we have a free market Freddie Mac and Fannie Mae should be allowed
to go broke.
New entities will arrise to fill the vacume left by Freddie Mac and
Fannie Mae in the mortgage
market.


Best Regards
Tom.




That's because _you_ have no money invested there...


Everybody has money invested there, directly or not. They hold half of
the country's 12 trillion dollars in mortgage debt. They truly are too
big to fail. If they did, we wouldn't be talking about recession. We'd be
in a hell-bending depression that would knock down the world's economies
like dominoes.

The idea that we could let them fail and that some other "entity" would
pop up to take their place is a blissful pipe dream. Institutions like
those two depend absolutely on intelligent management; in this case, on
anticipatory regulations and requirements of capital to back the loans.
It could have been done, but that kind of regulation is antagonistic to
the current economic ideology -- which is to be happy, don't worry, let
them run themselves. Hah.

It's time to stop kidding ourselves and to face the fact that we've let
these enormous financial institutions -- including the big investment
banks, as well as these mortgage backers -- run rampant at the expense of
our entire economy. It is nuts; economists and smart financial people
knew it was nuts; but there was so much money being made that their
voices were shut up or shouted down. The party's over.

--
Ed Huntress

You have to have a mortgage to have money invested in the mortgagee
companies.

There's hardly an economic activity in this country that isn't connected
somehow to the mortgages held by Fannie and Freddie. It affects your loan
rates at your bank, your ability to obtain credit, the price of gasoline at
the pump...it's all tied in, in terms of money supply, loan rates, and
liquidity.

So you may not gain or lose directly on their economic situation, but you're
affected by the fallout any which way you turn. Any institution that holds 6
trillion in debt leaves a big wake behind.


It has certaintly been an interesting morning to read the news!

break

Ed,
Remember when they split up Ma Bell - because she was getting "too big".

Yeah, and I was writing papers about that in my Economics of Media class,
while it was going on. My professor (Dr. Robert Babe) had written a paper --
his PhD dissertation, actually -- that was used as important evidence in the
government's case, so we were really into it.

The issue with Ma Bell wasn't its financial influence. It was the
stultification of technology and the rate manipulation that resulted from
the monopoly. That's an efficiency issue, not primarily a financial issue.

--
Ed Huntress