Fannie and Freddie Bailouts

Fannie Mae and Freddie Mac, two of that largest mortgage backers in the US, have gotten bailed out by the US government, and some people think it’s a good thing and some think it’s a bad thing. For one, I think it’s a good thing because this was obviously needed so that many homeowners don’t lose out and also so that the economy doesn’t totally tank – in fact on news of the government bailout, stocks actually rose slightly, which is somewhat counter to what most would think intuitively since it isn’t exactly glowing news for a faltering economy.

Those who are invested in financial stocks should be happy about this bailout though, since it signifies that when a major financial institution is in dire straits and serious danger of going under, those that are invested in those financials have less to lose. Of course, the stock prices would still be reduced, but you wouldn’t be looking at a total 100% loss if the government came in and bailed the bank out.

This also means that those who cannot afford their mortgages currently will be assisted by a range of government sponsored financial help programs designed to help those that are over their heads to pay their mortgages at reduced monthly bills or perhaps through some sort of cooperation of reduced interest rates. The move also instantly cut the prime rate as well.

It looks like in the end the most people will benefit from the government bailout, but the financial analysts are still saying we are a long way form economic recovery, and the financial and mortgage markets have even longer to go than the general overall economy and stock market. Commodities seem to be doing well still of course because of the rising costs of energy and living expenses and food, but it seems that all financial related stocks will be towing the line for years to come.