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Congress Approves Bail Out For Homeowners, Fannie Mae, and Freddie Mac

By Erik Folgate

Here is the article from the AP, via Yahoo Finance about the House sailing through a bill to bail out homeowners and the Fannie Mae/Freddie Mac institutions.

I love how Yahoo Finance titles it a “rescue” when it should be called a “bail out”. Rescue makes it sound like Congress is doing such a great, noble thing. I know that I sound negative about this, and for some families, it will help them out. There were some families who were truly tricked into a mortgage that they didn’t understand. There were others that knew exactly what they were doing, but the power of greed took over and they moved up in house by taking advantage of creative financing. Then, there’s the mortgage lenders who knew exactly what they were doing the whole time. They’ve been in the business for a long time. They knew these people couldn’t afford the houses they were financing, but they still extended the credit.

My biggest concern with all of this is the precedent that it sets for a free market economy. You cannot have a big reward without a big risk. The government is taking away the risk for those that extended these loans, because we are in an election year. Take away the election year, and the government would let the housing market correct itself. Instead, they want to convince the American people that they care about them. My other biggest concern is that we will be helping speculators. Do you think that real estate speculators should be bailed out? A real estate speculator is basically a house-flipper. He or she bought a ton of property during the boom, and then the bubble burst, and they were stuck with a bunch of real estate that wouldn’t sell. If we help these people, we are taking away the risk they took by buying the properties.

And now, the icing on the cake:

The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the agency. It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers, and increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

Oh by the way, this bill is going to increase the national deficit to $10.6 trillion. Guess who’s going to pay off this massive debt that the government keeps racking up? It’s going to be us! How can an industrialized nation like the United State of America have such an obscene debt load? Don’t just blame it on the president. Blame it on every stinking politician in the House and Senate that has no regard for fiscal responsibility. The government has no clue how to balance their checkbook, but you don’t have to be like them. We can change the lack of financial control of this country with a grassroots effort. Who’s with me?

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • ekrabs

    Yeah, the ballooning national deficit really bothers me as well. Politicians (and perhaps America in general) really needs to become more financially-minded.

  • Mike

    I’m no fan of our president, but I would have stood behind him had he followed through with his threatened veto. Those who have practiced fiscal responsibility are rewarded by having to pay the bill for those who haven’t. I’m not an economist, but doesn’t the easy money policy also punish those who have saved dollars and are at a loss for finding safe and rewarding investment vehicles? My mother has 100K CD coming due that had a yield close to 5%. I’m probably looking at replacing it with one that pays 3%. Meanwhile, the irresponsible lenders and buyers are rewarded with low rates, bailouts, and discount window access. Will this not have long term consequences?

  • author

    It will definitely have long-term consequences, Mike. It’s sick to think about. And the generation of the 20′s and 30′s will be the ones paying this deficit off. Ugh!

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