Economist Barry Ritholtz reminds us in the video above of the continuing importance of watching Fannie Mae and Freddie Mac. The housing and economic crisis continues and in its wake, Fannie and Freddie are shoveling cash directly into Wall Street in what Ritholtz calls the “perfect bailout.”
The Treasury gave Fannie/Freddie a “blank check” allowing them autonomy with finances (even if it means losing money), at the expense of the taxpayer.
According to Ritholtz, Fannie/Freddie use this blank check to buy mortgages from Wall Street at inflated prices and the banks get to “unload” their bad loans at a price that avoids any loss. Does Fannie/Freddie care? Nope… blank check, remember? Do taxpayers care? They should…
Fannie/Freddie appear to be acting in the shadows, no one really knows what they’re doing, but this looks eerily like the TARP scheme (use taxes to clean toxic bank assets). Remember how well that went over with the public?
