There he sat, the Chairman of the Federal Reserve, Ben Bernanke, telling lawmakers in Washington what most of the rest of us have known or at least guessed at long ago.
It was as if a dark storm cloud churned by wind and ignited by electricity had somehow broke into the room and sat down on a chair before a microphone and began to speak. And, what did this cloud have to say?
“The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately,” the storm cloud named Bernanke said.
Let’s take what the cloud said bit by bit and see what was actually being said, shall we?
- The possibility of higher energy prices–Translation:Gas will soon be 7 bucks a gallon—-unleaded!
- Tighter credit conditions–Translation:You can just forget about that exclusive black Amex card.
- Still-deeper contraction in housing market–Translation: We will all soon be homeless.
- Significant downside risks to the outlook for growth–Translation:Brother, can you spare a dime?
Now, that is one smart storm cloud speaking.
So, will homeowners facing foreclosure get the same sort of potential help from the government to ride this storm out as Freddi Mac and Fannie Mae will likely get?
Come on–what planet are YOU living on?
Fannie Mae and Freddie Mac will be given access to cheap credit and the U.S. government (read, taxpayers) will probably gain the right to purchase shares of these two mortgage giants.
Some –like Bush–insist this is not a bailout. Yeah, and Santa doesn’t do strange things with Rudolph during all those North pole nights before Christmas.
Of course it will be a bailout if Congress goes along with this plan. You really think taxpayers won’t get stuck holding the bag, the same way they did after the Savings and Loan scandal? You might as well get your check books ready now.
Contrast that with what hurting homeowners are likely to walk away with. Some economists have already passed judgment on the proposed legislation and have said that, if passed, it would not really help many homeowners…In fact, it will probably help relatively few.
And, the storm cloud named Bernanke knows this…that is why his comments painted such a bleak picture.
Related posts:
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- Protecting Yourself During Winter Storm Season
- The Battle for the World’s Skies
- Fed Chairman Ben Bernanke to Abandon Lenders and Investors
Article Author: Charles FeldmanCharles has written 179 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com
Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.
Joshua Dorkin
{ 5 comments… read them below or add one }
Pretty scary stuff isn’t it? Although Fannie/Freddie are hurting, their capital is still good. Dwindling but they are still capable of raising money for the time being. All in all, the Feds MUST bail them out. If they don’t, chances are the housing market will get worse than the Great Depression. I don’t even want to think about what will happen with no Fannie/Freddie. I’m an optimist though.
And this is the same argument used everytime the Feds bail out someone. If they don’t, things will really get bad. I can’t say I have the answer but if this same scenario is repeated time and again, there has to be a different solution.
Fannie and Freddie were and are quasi federal agencies that are shareholder owned. It’s a complicated situation. But I think we can agree that now is not the time for federal agencies to be going chapter 11. They did what had to be done. They bailed out the mortgage banking system, not fat-cats on Wall Street.
The loans Fannie and Freddie hold are called “Government Insured Mortgages” for a reason. Hint: It’s because the Government Insured them.
In other words, the taxpayers were already on the hook long before the Fed made these moves.
Great post! Scary to see how our entire economy is in a downward spiral because of this housing crisis. We can talk about Freddy and Fanny all we want, but what’s done is done. It’s time for homeowners to take matter into their own hands, and get themselves out of foreclosure, yes themselves. This is not to say they shouldn’t seek professional financial help and advice, this is obviously a necessity. What I mean is, along with the professional financial help, they need a positive and assertive attitude, and they need to act right away, rather than waiting to see what the government will do.