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Drexel U.: Column: Government steps in to stabilize economy(U-Wire Via Acquire Media NewsEdge) UWIRE-07/25/2008-Drexel U.: Column: Government steps in to stabilize economy (C) 2008 The Triangle via UWIRE By Mihir Oza, The Triangle (Drexel U.) PHILADELPHIA -- As China is getting ready for Olympic tourists, on the other side of the continent much fuss is being made in the behemoth financial markets of America. Fannie Mae and Freddie Mac "are the nation's dominant providers of funding for home mortgages," according to the Wall Street Journal. For decades they were impervious, but they are now in the depths of hell - financially speaking, of course. Our U.S. Treasury and Federal Reserve have boldly stepped in, allegedly to help the collapsing "housing giants that make the American mortgage market run," according to The New York Times. They also are victims of the falling mortgage prices and the continual rise of defaults. And albeit most people we come across detest our government for one reason or another, the administrators in office today will not allow our economy to dilapidate totally. In addition, the citizens of our country are very aware of the recession that we are in, along with the alarming collapse of our economy. It's about time Big Brother encroached and took some more responsibility. According to The New York Times, Fannie and Freddie together "own or guarantee about $5.2 trillion of U.S. home mortgages," and such reasons make it clear that their survival in the jungle of today's world markets will ultimately "influence the level of interest rates and weigh on the strength of the dollar for years to come," analysts say. We rely on them to fulfill our American dreams, and they've been a puissant backbone for the government, for they handle the stress of providing affordable home mortgages to families across the nation. Well then what ingenious plan of action has our government actually established? In such a crisis there are a few things they could do for Fannie and Freddie: lend them money, buy their stock, and proffer a bigger line of credit or an equity investment by the U.S. government. But these promises are merely funds to keep them operational, and most importantly "reinforce the notion that investors can count on the government to bail them out in a crisis," according to The Wall Street our government would have not a dime to spare, however no one in the White House has addressed such a concern. President Bush and Treasury Secretary Henry Paulson Jr. are all for a government takeover, though they have not made clear exactly how hefty of an equity investment or credit line increase will take place, each of which are currently capped at $2.25 billion. The Treasury cannot follow through on such momentum ere receiving further congressional approval, "although lawmakers appear ready to act quickly" according to The Wall Street Journal. However, if all goes smoothly, Paulson said, "This could be on the president's desk next week," assuring the country and its citizens that for such matters we will waste not a moment. Fannie and Freddie are awfully fortunate for their high status in the world markets, and Fannie Mae's CEO Daniel Mudd is all for a government intervention. But before this case is closed, I still bear another concern: how can we be sure these companies won't plummet once more and leave our country and government to later remorse? Well, according to The Wall Street Journal, "the White House [will] try to install a new slate of presidentially appointed members at the companies" which will probably be an effective measure, at least on a temporary basis. Hence, America worry no more because everything seems to be under control. Otherwise we may very well be victims of a political skullduggery, and you and I will be repaying our country's everlasting deficit until we're on our deathbeds. ##30## ((Distributed on bahalf of U-Wire via M2 Communications Ltd - http://www.m2.com)) ((U-Wire - http://www.uwire.com)) Copyright ? 2008 U-Wire |