Is Nationalizing Mortgage Lenders a Step Towards Communism?

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In summary, the United States government has nationalized mortgage lenders in response to the collapse of the housing market in 2008. This move was made to stabilize the economy and prevent further foreclosures and financial crisis. The nationalization process involved taking control of the largest mortgage lenders, Fannie Mae and Freddie Mac, and providing them with financial support and oversight. This action has been met with both controversy and praise, with some arguing that it was necessary for the well-being of the country while others criticize it as government interference in the private sector. Ultimately, the nationalization of mortgage lenders remains a significant event in the history of the US housing market and the economy as a whole.
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  • #37
wildman said:
Yep. But I think you all missed why Bush and the Congress are doing this. They did it because the Chinese ordered us to do it. We have lost our independence due to the large amount of money we owe others.

wildman said:

The other link said:
the Treasury may not have had any alternative if it wanted to prevent an immediate meltdown in the U.S. mortgage market and in the U.S. financial system in general.
There is a difference between the statement in the link and your characterization of it.
 
  • #38
jimmysnyder said:
There is a difference between the statement in the link and your characterization of it.

I already mentioned elsewhere that what I said was meant to be sarcastic exaggeration.
 
  • #39
BobG said:
Realistically, Freddie Mac and Fannie Mae own 5 trillion dollars of debt. I guess if every loan they own defaulted (in other words, half the home owners in the US walked out of their homes and their mortgages), their own personal debt might be pretty close to that, but that $5 trillion is almost a number just thrown out there for shock value.
Yes, shock value. It, of course, also assumes that all the homes that the mortgages purchased are utterly worthless.

What the actual exposure is here is tough to gage, but I suspect it is quite small. The real problem isn't the defaults, it's liquidity. Because of the explosion in housing prices over the last 10 years, I suspect (though I am not sure) that the value of the property in those mortgages is larger than the value of the loans themselves. The problem is that it takes perhaps as much as a year from the time a borrower stops paying until the lender can sell the house and get the money back (perhaps even with a profit!). The lag causes a cash-flow crisis. And that causes them to cut back on how many new mortgages they are willing to back. Which deepens the crisis and extends the national economic slowdown.

I suspect that the biggest share of the losses here will not be the general public, but will be the shareholders - who lose everything (something on the order of $50 billion, their market cap at the beginning of the year). And that's the way it should be.
 
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  • #40
russ_watters said:
The problem is that it takes perhaps as much as a year from the time a borrower stops paying until the lender can sell the house and get the money back (perhaps even with a profit!).

I was under the impression that any profit from such a sale must be returned to the previous owner, n'est pas?
 

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