Posts Tagged ‘home loans’

What Got Us in This Economic Mess We Are In?

July 12, 2008

When I started this blog, I stated that it would mainly focus on local and state issues. That focus gives me a lot of leeway because so much of what happens in other places affects us here.

For instance, when I heard the national news that the mortgage giants Freddie Mac and Fannie Mae could fail, I didn’t call anyone in Washington; I called my local stock broker to get filled in. He did a good job of it and as a result I don’t feel any better about it.

Freddie and Fannie may have to be bailed out by the federal government. If so, I’m for it. Their going under would be an international economic disaster. They hold five trillion dollars in mortgages. That’s more than half the national debt.

All of the lousy economic things that have been happening lately naturally make us want to find someone to blame. Well, that isn’t hard to do. Somebody screwed up big time. One of the big screw ups was to privatize Freddie and Fanny. It started out in 1938 as a government agency designed to help Americans get home mortgages. It worked. But, Congress couldn’t leave well enough alone, deciding to let it be taken over by two private companies, but gave them special treatment, for one thing, implying that the loans would be backed by the government. I just read a story on that said the firms took advantage of that special treatment, deciding to use it to increase profits for its stock holders. That desire for constantly increasing profits led to risky loan practices which contributed to the situation the country is in right now.

Columbus is traditionally not like the rest of the country when recessions strike. Fort Benning is the reason for that. The money from the post keeps flowing into Columbus no matter what the state of the national economy. However, the foreclosure rate has been high in the area so it is not totally immune from national economic trends. And, if what I have been reading is true, if Fannie and Freddie collapse, the home real estate market will come to a screeching halt everywhere in the country, including Columbus.

What are my credentials for making the economic observations? Not impressive, but everything I wrote is based on something that my stock broker told me, or what some financial expert said on TV and radio and wrote online. If I am wrong about any of this, feel free to correct me. Just click the “comments” link below and write away.

If the fed does bail out Freddie and Fannie, it will cost billions in tax dollars. Since our taxes come nowhere near paying for what the government spends, it will have to borrow more from China and Japan. Just think of the tax dollars we have to spend paying the interest rates on those loans.

The federal government simply has to become more responsible with our tax dollars. The pork that Congress doles out every year to keep getting reelected has to stop. What makes us think that we can continue to be Santa Claus to the rest of the world? Why are we spending so incredibly much on maintaining troop presence is so many places in the world? Why are they still in Germany and Japan? World War Two was over in 1945 and both countries have been thriving democracies for about 60 years. They are allies now, good ones. Can we really afford to be the world’s police force? We should limit our military action to that which truly is in our national interest, such as Afghanistan, where we need to increase our presence.

What about Social Security, Medicaid and Medicare? All three are in trouble. And what do some want to do to solve the problem? Privatize. That’s just not always the solution. Think Fannie Mae and Freddie Mac.