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Did Treasury make the right move on Freddie and Fannie?
Equity markets around the world surged on the Fannie Mae and Freddie Mac bailout as hopes rose that the U.S. plan to take control might put at least a temporary floor under troubled financial markets. Together, the two companies back about half of $12 trillion in mortgages in the U.S.”This is a baby step in the right direction,” William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts, said about the plan’s effect on housing and the economy.
Not everyone is convinced. “This euphoria might fade, because Fannie and Freddie are not the problem,” said Christopher Low , chief economist at FTN Financial.
“Their woes are a symptom of a worldwide contraction in credit that may not be cured by the decision.” The Prudent Investor cites how the plan potentially doubled U.S. public debt overnight.
Did the U.S. Treasury make the right move? What’s your view?
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