McCain open to Fannie-Freddie bailout; Isn’t everyone?
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The dangerously declining duo known as Fannie Mae and Freddie Mac is dominating financial news today. Worth noting:
Tom Petruno reports on his Money & Co. blog that both stocks are sliding today ‘on fears that they won’t survive without a government bailout that could wipe out their shareholders’ stakes.
Not helping: A former regional Fed president says Fannie and Freddie ‘are insolvent.’ From Bloomberg via Calculated Risk: ‘Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae’s assets fell 66% to $12.2 billion, data provided by the Washington company show, and may be negative next quarter, Poole said.
More from Poole: ‘Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,’’ Poole, 71, who left the Fed in March, said in an interview.
Also: John McCain (pictured), campaigning in Michigan, says he’s open to a federal bailout of the big loan buyers: ‘Senator John McCain said here Thursday that he would be open to federal intervention to save the nation’s two most important mortgage companies, Fannie Mae and Freddie Mac, the New York Times reports, quoting McCain: ‘Those institutions, Fannie and Freddie, have been responsible for millions of Americans to be able to own their own homes, and they will not fail, we will not allow them to fail,’
Two more to chew on: Reliably right of center CNBC talking head Larry Kudlow says if Fannie and Freddie need cash, they ought to get it the old fashioned way: by asking investors for money: ‘I would prefer, at least at this point, that private capital do the job,’ Kudlow writes.
Why would a right-leaning economist bother to say he prefers a private solution? Because the Wall Street Journal today editorializes that Fannie and Freddie need public money (that would be your money): ‘Our own proposal, made months ago, is to require a more honest form of socialism by injecting taxpayer money now into both companies (say, in the form of subordinated debt or preferred stock) to recapitalize them enough to weather the current storm. This would help prevent a U.S. balance sheet debacle, and it would force the politicians to acknowledge the mess they have created.’
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Associated Press