US Government Takes Over Fannie Mae & Freddie Mac

[scfr]

The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.....

Officials announce takeover of mortgage giants: Financial News - Yahoo! Finance

Info on the Treasury Dept web site:
2008-9-7-11-17-22-17483: Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers

[Broken Arrow]

Yeah, saw this earlier today.

I'm not sure what to make of it yet.

Pretty serious and sobering news though.

[kork13]

so for those of us less experienced.... what exactly does this mean for people? I don't really understand exactly how this works, or how it changes things, what impact it will have on americans, and so on....

[sweeps]

It means you, Joe Taxpayer, will be on the hook for billions of dollars.

[Broken Arrow]

Originally Posted by sweeps

It means you, Joe Taxpayer, will be on the hook for billions of dollars.

Yes, the impact of this news is, in my opinion, fairly profound and not to be under-estimated... and will likely weigh down the economy for years to come. But exactly how, I really don't know yet. Going to see what the talking heads have to say about this come Monday.

[simpletron]

I was reading the newspaper this morning, only to find this out.

this is good news for
bond holders - the government is going to back the mortgage back securities. no worry of default
home buyers/refinancing - government guarantee is going to reduce the spread between mortgage rates and treasuries. mortgages rate are going to go down.

this is mixed news for
tax payers - while we are on the hook for billions of dollars, we probably were going to be on the hook for even more if the government did capital infusions. the big question is how many billions of dollars and will it affect the US credit rating? if the billions in losts are big enough(couple hundred billion, at least) to affect the US credit rating, that will have a lasting impact because all new US debt would be a higher interest rate and cost the government way more than just the new debt. the US government has 9.8 trillion dollars in debt, so a few billions is just a drop in the bucket.(freddie and fannie guarantee over 5 trillion dollars)

stock market - I can see this be precieved as the end of the housing/credit crisis, which would be good news for the stock market. but who knows what repercussions, this will have. (thinking about banks holding large number of prefered stock in freddie and fannie)

this is bad news for
stock holders of freddie and fannie - we're basically dead. I bought fannie mae betting against scenario .

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It's less than an hour into the stock market opening, but trading has already been wild and crazy!

Sorry to hear that Fannie didn't work out for you.... I have to say, it did look tempting at $1, but all this is too much risk for my taste.

[PrincessPerky]

Originally Posted by sweeps

It means you, Joe Taxpayer, will be on the hook for billions of dollars.

That would be the short version as to weather it is billions more or less than the govt not stepping in..well it is certainly more than if the govt kept their nose completly out.

[scfr]

Perhaps Treasury yields will rise? Haven't bought a T-Bill in quite some time ... Might be time to start thinking about dusting off my TreasuryDirect account.

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Originally Posted by scfr

Perhaps Treasury yields will rise? Haven't bought a T-Bill in quite some time ... Might be time to start thinking about dusting off my TreasuryDirect account.

Relevant article. I'm getting mixed signals, but then I'm also a bit hazy right now.