Betcha didn’t see the Fannie Mae/Freddie Mac bailout coming, did you? As predicted, we are now about to live through the recession while paying for someone else’s greed.
Based on the bleak grades given to the Hope Now Alliance [Who comes up with these names? The Bush Administration sure knows how to color ideas, good or bad, with propaganda phrasing not seen since the Third Reich. Godwin!] it was inevitable that the Feds would step in and offer a bailout in an attempt to stabilize the housing market, for which the two mortgage giants play a $5 trillion role. In return for up to $200 billion in short-term financing the U.S. government will receive warrants representing 80% of ownership. That’s warrants. Not ownership.
If that’s the game that the Treasury Department is going to play then I want my warrants now, and as a new player in this housing market I demand having the ability to buy and sell my warrants that the government is foisting on me. But I probably won’t get that opportunity. I probably won’t even get a chance to determine whether or not the warrant price is reasonable (note to myself: It probably won’t be).
Instead I’ll pay now through taxes to provide liquidity to the existing shareholder pool, then have to pay again if I want to actually buy shares on the open market at the probably inflated warrant price.
This whole mortgage thing just irks me. It was obvious years ago that selling subprime mortgages could not be sustained yet risk managers, risk management software and federal regulators all failed to address the simplest of questions: What happens should the bubble burst? That they decided that such a scenario had minimal risk associated with it is an understatement.
We are now the proud owners of a huge fraction of the U.S. housing market. May it serve us well.