So today it looks like Congress is going to vote on the legislation to give Fannie Mae and Freddie Mac access to money - if they need it.... This is a tough situation and one that isn't going to be resolved with the typical media soundbites.
As a taxpayer do I want to have to "bail-out" institutions for making errors in judgment - NO.... however Fannie and Freddie account for 1/2 of all the home loans in the country - so if 1/2 the money is gone - then I hate to see what happens to the housing market. If you had to sell your house -there would be no buyers. Even people with fantastic credit would have difficulty coming up with banks that would finance their mortgage. This would impact all areas of the economy and really we don't need to take any more hits on our economy.
I think Paulson and Bernake are on the right course in making this line of credit and federal bonds available - if they need it - to both Fannie and Freddie. As an optomist I hope it won't be necessary but it is a safety net that I think is needed to help calm the financial markets.
Recently the Office of Federal Housing Enterprise Oversight (OFHEO) came out in strong support of this bill. The bill also provides some money to homeowners that are struggling to keep their homes. I don't know how it will be structured or who will oversee this process but I think it is a good first step.
When ever problems of this magnitude occur it seems like regulations and processes are put in place to keep it from happening in the future. I do believe the Federal Gov't acted too late for this crisis but am glad they are finally doing something. There is much blame to go around but most of the people that commited fraudulent activity have moved on to something else, too bad they can't put that energy and creativity to good use.
The OFHEO has also release the US Housing Monthly price index and nationwide prices declined .3% from April to May and in the mountain region (which includes Colorado) the price index declined .2% from April to May of 2008. I think this is good news as the decline is much lower than projected and a little below the national average.
The only way to increase prices is having more demand which will only occur if people are able to get a mortgage which brings us back to giving Fannie Mae and Freddie Mac access to the capital they may need in the future.