Friday, July 18, 2008

Foreclosure Bill And $300 Billion Housing Bill Could Pass, Thanks To Fannie Mae and Freddie Mac

Democrats have been pushing a foreclosure bill that would provide $4 billion to states and cities to repurchase foreclosures and rehabilitate them, along with a more encompassing $300 billion housing bill. Republicans have strongly opposed the bills saying they represent a bailout of lenders, among other things. Now that the White House and Republicans want to get their Fannie Mae and Freddie Mac rescue bill passed ASAP, Democrats are trying to strike a deal.

The Fannie and Freddie rescue plan involves extending the government sponsored entities an unspecified line of credit (basically unlimited), along with establishing the right for the government to step in and buy equity positions in the company if they need to, according to the Wall Street Journal. The Congressional Budget Office estimates the cost of Treasury's proposals to the federal government to be in the tens of billions of dollars, according to the Wall Street Journal. This doesn’t sound so hot to us taxpayers, but if you consider what would happen if we let Fannie and Freddie fail, tens of billions of dollars doesn’t sound too bad. These two companies run the mortgage market, and if they go under, so too does the entire U.S. mortgage industry. It is one of those "you’re damned if you do, damned if you don’t" things.

While Democrats do recognize the importance of Fannie and Freddie, most are reluctant to give the companies a blank check. They want to make adjustments to the proposal, but Republicans want to see this thing done now. This is where politics comes into play: Now the Democrats are trying to push their foreclosure and/or housing bills to be passed in conjunction with the Freddie and Fannie one, and are threatening to hold talks up unless Republicans comply.

Whether or not Republicans give in remains to be seen, but I can’t help to think as a taxpayer that I’m getting the short end of the stick here. So you’re telling me that not only do you want to pass a bill that is going to cost us tens of billions of dollars, but now you want another $4 billion minimum (possibly $300 billion if the full housing bill is included) on top of that to bail out lenders who made dumb choices?

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