Massive New Bailout For Real Estate—Or Is It Really For Banks?


It is actually getting hard keeping track of just how much money the government’s various bailout initiatives add up to. An Associated Press report says “total bailout commitments, loans and pledges of backing neared a staggering $7 trillion.”

Of course, much of this is “money” that may never get spent, or will be returned to the government when it sells shares of stocks it has received to bailout many banks or lending institutions. But a lot of that money, of course, will probably never be seen again by human eyes.

The latest is a massive program the purpose of which is to free up credit. That was tried before; but this time the government is sort of saying “we mean it.”

And, perhaps it does.

The part that relates directly to real estate is this: The Fed is going to spent $500 billion to buy mortgage-backed securities. But it is only going to buy the ones backed by Fannie Mae and Freddie Mac, which means not the subprime ones that seemingly ignited this financial fire more than a year and a half ago.

Another $100 billion goes to buy mortgages currently held by the mortgage giants, says the A.P.

Not everyone thinks all this is a good idea.

I’ve talked to a few investment experts the last couple of days and some say , though painful, it would actually be best to let home prices sink more rather than keeping them inflated with an infusion of taxpayers’ money. They argue that this will only set up a vicious cycle and we will find ourselves right back where we started from not too far down the road.

Of course, no one really knows what will happen next, least of all the federal government.

Barack Obama has assembled his financial team–he is seeking continuity. But is that such a good idea? Many of the people the President-elect has tapped were involved in the months long bailout effort, much of which has not worked outright or backfired and made matters worse.

Hardly an encouraging reference I’d say!!

About Author

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.

1 Comment

  1. The Government is foolishy not keeping the Citizens best interests at heart. They are trying to prevent something that is bound to happen with any Real Estate Market. They are trying to stop a downturn by throwing taxpayer money into the market in hopes it will turn back up. This will not happen and we the taxpayer will be left with the bill.

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