Saturday, September 6, 2008

Being Fannie Mae and Freddie Mac

What company wouldn't like to be a Fannie Mae or Freddie Mac? What company wouldn't want to be a quasi-government agency with government backed securities on the stock exchange? This is sweet. But for whom? Apparently not for tax paying citizens who will bailout such companies, nor for those who do not wish to leave an ever increasing debt to their children's children's children.

The biggest question now is whether covenants are in place to repay the bailouts and whether measures are made to decrease the probability of future bailouts. (Simply getting rid of the CEO is not nearly enough.) What is the likelihood that we will see such a crisis again? Can you say S&L? Here's a thought. Should the deregulation laws of the 80's be looked at anew? Although, there is undoubtedly no going back.

Funny thing, though, with such deregulation laws Fannie Mae and Freddie Mac appear as the best posters, having seemingly government oversight as both backers of securities and the people. Hmmm?

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