Abysmal Slump Continues for Fannie and Freddie

The well-publicized fall of mortgage giants Fannie Mae and Freddie Mac accelerated again Wednesday, according to Bloomberg.

While the Treasury Department takeover looms on the horizon, we must question the efficacy of using billions of taxpayer dollars – some have placed the figure well about $15 billion – to bailout poorly managed finance houses. Fannie Mae and Freddie Mac are victims of their own malfeasance, and they are threatening to take the rest of the economy down with them.

Hoping to get out before it is too late, investors and shareholders have dumped their shares in both companies. The market value of the two has lost a combined $53 billion in the last year, or approximately 90 percent of their total fair market value before the crisis.

There seems to be no certain solution to the problem presented by Fannie and Freddie. Former Fed chairman Alan Greenspan has promoted splitting the companies apart and selling them off, but when the American market is so heavily infiltrated by foreign investors we can hardly afford to possibly put $5 trillion of our home mortgages in foreign hands – that $5 trillion is roughly 42 percent of the $12 trillion value of the entire U.S. housing market.

Source Bloomberg:

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