September 8, 2008
Posted: 11:32 AM ET
Business Correspondent Jennifer Westhoven
This weekend, the US Treasury pledged to spend up to $200 billion to shore up Fannie Mae, and Freddie Mac. They’re basically booting out the CEOs and taking over. These mortgage giants got themselves in HOT water by taking on risky loans, but they’ve become “too big to fail” in the eyes of many. They’re such huge players in the mortgage market (because they are affiliated with the government) that if they went under, it could rock the economy.
Treasury Secretary Henry Paulson speaks at a news conference Sunday.
So the main benefit of a bailout? We avoid a “financial tsunami” (we hope). That’s Treasury Secretary Henry Paulson’s main goal: get confidence up so we don’t suffer a terrible financial shock (there were fears on the trading floors on Friday of such a thing).
What WILL you see? Analysts say the bailout will likely mean lower mortgage rates all around … which could be a crutch for the housing market (haven’t heard any economists saying this will mean the market jumps up out of its chair and yells “I’m healed!” though).
Just in time – a new survey says 9% of US mortgage holders are in foreclosure or behind on their payments. Also good news, the New York Times says “some delinquent borrowers may have a better shot at modifying their loans and ending up with lower fixed payments.” That would be a great help. Let’s just hope it doesn’t cost anywhere NEAR $200 billion.
PS: The federal budget for cancer research is about $6 billion. Wish we could put the money there!
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