Ignoramus19502 wrote:


I do not see any evidence for this.

Some people or businesses who invested in mortgage backed securities
that are guaranteed by these companies, would be a little poorer
without those guarantees. And home loans will be slightly more
expensive, as they should be. But I do not see a big fallout from
Fannie mae and Freddie Mac going bankrupt.

What you have to understand is that these institutions are
essentially a component of the US "central bank", and although
partly privatized, they are essential in maintaining liquidity
among the banks. Everybody in the financial sector depends on
this liquidity, and banks won't lend "commercial paper", ie.
short term loans that all sorts of companies use to buy stock
from day to day, unless thye know that these institutions will
be there to back up any daily shortage of cash.

At least, that's how I understand this stuff, which may be a bit
out of date. Without that liquidity, grocery store chains won't
be able to buy stock for their stores, newspapers won't have
paper to print on, gas stations won't have tankers delivering
fuel, etc. That won't be a complete shutdown, but a LOT of
deliveries would be delayed, store shelves would have less than
the normal quantities, etc. If that causes panic and hoarding,
it could get real ugly, real quick!

Jon