Fannie Mae and Freddie Mac are now officially subsidiaries of the Federal Government. Because we all “know” that it is best to minimize government involvement in the private sector.  Ok, strictly speaking they are not “subsidiaries”, but rather they are in “conservatorship” managed by the FHA.  TheStreet.com also tells us that “The current CEOs of the two firms will depart after a brief transition. At Fannie Mae, CEO Daniel Mudd will be replaced by Herb Allison, former vice chairman of Merrill Lynch… and chairman of TIAA-Cref. At Freddie Mac, CEO Richard Syron will be replaced by David Moffett, former vice chairman and CFO of US Bancorp…. Allison and Moeffett’s ‘compensation will be significantly lower than the outgoing CEOs,’ said Lockhart.”

Something that makes me nervous about the plan is that the government will be buying Mortgage Backed Securities from Fannie and Freddie.  Regrettably, it is now difficult to figure out just how secure those securities are.  As many funds and companies have found themselves behind the 8-ball as a result of these MBSes, what happens if the United States Government ends up in over their collective heads?

It’s all part of a massive, four-part, rescue plan that will cost taxpayers tens of billions of dollars. Tens of thousands of millions of dollars, if you prefer. And remember, we “have to” bail them out — after they spent years trying to circumvent the regulations that should have kept them out of trouble, and outright lied to investigators — because of the massive fallout that letting them fail would have on our already-troubled housing market.  Personally, I am willing to go out on a limb and say Phil Gramm is probably ultimately to blame for this.

I honestly figured they would wait until Monday morning.  However, this way, all the bad news is out there ahead of the NYSE opening tomorrow morning at 9:30 EST.

Also in today’s Federal Takeover News, Silver State Bank has been shut down by the FDIC.  It’s the 11th failed bank this year.   Interesting take on it here, from somebody who remembers the Savings and Loan crisis of the 1980s. As with IndyMac, if you have pending business with Silver State Bank– accounts, mortgage application, buying property they own — you will want to check status and develop a backup-plan on Monday.

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Posted in Mortgage and Financing Nevada The Law by Bridget Magnus Comments Off