Congress is using our check book to bail out Fanny Mae and Freddie Mac to the tune of one trillion dollars plus. There is something, hidden here, have you figured it out?
Right now, Freddie Mac and Fannie Mae are hot potatoes. A government guarantee doesn't make them smell any better. The general mantra is, “Let someone else own this crap.” Interest rates could jump to more realistic levels. That in turn could move the housing market into the deep end of the pool.
Some Republicans changed over to vote for the bill, indicating the situation is far worse, than anyone is letting on. This is nothing more than a “Hail Mary Pass for the End Zone.” Big money is moving for the exits. The losses are real, and still only the banks have lost money, the depositors have not (careful you can choke on that sentence). The financial system is in need of a massive injection of liquidity. The 150 billion dollar stimulus package was insufficient to do the job. We are looking at 17 trillion dollars worth of savings that are linked by fractional reserves to the hedge funds and Fannie Mae. The phrase “House of cards” comes to mind for some reason.
The world’s financial markets are contracting. Other nations don’t have our deep pockets (it’s their money in our pockets), few have government backing.
Are we playing a waiting game? Which country’s banking system will collapse first? Italy and Spain can feel the pain. China is also suspect; Communism and entrepreneurship make strange bed fellows. The failure of the Chinese banking system would “teach” their citizens a lesson; “Free enterprise sucks, socialism rocks!” Naturally we would be blamed for the misery created.
We could be looking at a worldwide financial meltdown. This financial contraction will reach everywhere. Our banking system can survive if people believe that their money is safe in a FDIC insured bank and leave it there. The trouble is, many people with US investments are foreigners. Leaving it as a deposit might not be an option especially if it’s over 100k. The first people in line will get their money; the last people in line get an education. So it kind of works out for everyone.
We have just started a game of musical chairs. Half of the deck chairs are gone and the band is still playing. I guess I'll sit back and enjoy the life boat races.