Fannie and Freddie--Welcome to Zombie Town

http://www.bloomberg.com/news/2010-08-16/treasury-fixing-mortgage-finance-system-juggles-limitless-bailout-economy.html

In case you don't know, Fannie Mae and Freddie Mac, when we took over these failing giants, guaranteed half of the mortgages in the United States worth about $5.2 trillion at the time.  There was a limit on the amount of help we could give Fannie and Freddie until Congress, the President, or pick your criminal, it makes no difference to me, committed UNLIMITED RESOURCES indefinitely, in other words, taxpayer bailout.

Things have accelerated in the direction of government in the last couple of years.  97% of all mortgages in 2009 were backed by the US Government.  There is virtually no real estate market now, outside of cash, without government backing the loan.  What does that tell you about the solvency of the banks??  FHA is still making loans with 3% down.  HAHA  Would you loan your money to somebody to buy a house with only 3% down when we are in the worst housing market in 80 years?  haha  I hope you don't hurt yourselves laughing.

The only solution is for the government to entirely get out of the housing market.  Let banks and people negotiate their own terms.  Both will have skin in the game.  The current system is not only a bad system, it is in total failure mode.  Fannie and Freddie are already a $153 billion drain on the taxpayer with hundreds of billions more to come, per the Federal Housing Finance Agency.


http://money.cnn.com/2011/02/11/news/companies/fannie_freddie_losses/index.htm

This is a colossal example of the failure of government trying to manage 15% of the economy when the obvious solution is free market capitalism.  Let bankers take the risk of the loan, not taxpayers.  Until then, there is no sure way to say with any accuracy what a house is worth.  I will be willing to bet that housing priced in gold with continue to crash massively.  With gold hitting a record high of $1436 today, a $100,000 house would cost just under 70 ounces of gold.  I predict that house will eventually go for 10 ounces of gold or less.

How it unwinds at this point is hard to figure.  With the takeover of Fannie and Freddie, the US taxpayer already is responsible for over half of the mortgages in the US.  How do you solve that without a default, especially when the economy and housing continues to crash and burn?  It should be obvious to all that we are passed the point of no return.

AND THIS IS JUST THE HOUSING MARKET!