Now that we have all the financial institutions failing, congress can no longer lie low to avoid the bailout blame. Fannie Mae and Freddie Mac account for 50% of all the mortgages held in this country. At the time of their bail out this month they had $5.4 trillion dollars in mortgages and $1.4 trillion in subprime holding.
Now we have the Bush Administration and the Secretary of the Treasury, Henry Paulson, suggesting that we create another Resolution Trust Corporation (RTC) like we had during the S&L Bailout to absorb these distressed mortgaged properties. The RTC of 1989 was created to manage and sell off the assets of the S&Ls, so how does that translate into buying bad paper while the home owner remains in the property? I do not claim to be a economist, but I do not see the logic in this suggestion.
Also how much will the congress go along with this idea? The fact is that in 2003 the Bush Administration tried to slow down the aggressive lending of Fannie Mae and Freddy Mac which has lead us into this meltdown. The New York Times story of September 11, 2003 read: “The Bush Administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” Who stopped him? The Congress with the strong Democratic ties back to Fannie and Freddy. So why do we think the Congress is going to support him more today?
The Bush Administration is asking for $700 billion to solve a multi trillion dollar problem. The battle is shaping up in Congress today, not necessarily to derail it but to complicate and delay the lawmakers authorization of the Treasury Securities that would finance Bush’s recommendations. Also they are faced with protecting all us taxpayers on one hand while helping the millions of struggling individuals with their mortgage payments. These are two goal that are inherently contradictory.
Oh, did I mention that Congress is schedualed to adjorn September 26, 2008, I doubt that much will change in the short term and we will be continuing to stuggle though these difficalt times.
What do you think???
As for me, I plan to continue to help the property owner, and the mortgage lender through the process of real estate short sales, which seems to be the least destructive solution for both parties given the financial problems of today
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