Wall Street Brand Of Socialism In The Midst Of Foreclosure Crisis

July 22nd, 2008 · No Comments

Last weekend Henry Paulson the treasury secretary and former chief of Goldman Sachs Investment gave the perfect exposition of Wall Street of Socialism in the midst of the foreclosure crisis. He said the Bush government would seek the approval of the Congress to bail out the two jumbo mortgage giants Freddie Mac and Fannie Mae. The latter were created by the government but are owned privately. These are profit making financing bodies that guarantee about half of all the mortgages of USA. It right now calculates to $5 trillion in debts – all related to the foreclosure mess.

Paulson wants and will get a line of credit that is without limits as a guarantee for their debts. Also will be got them the right to buy shares to supplement their capital base. Even while waiting for the Congress to give the final nod, the Federal Reserve has announced its willingness to sanction loans. Paulson explained that the recent subsidies were aimed to maintain and sustain Freddie and Fannie in their “current form.”

The plan is perfect with no end of pampering for the two despite the raging foreclosure tsunami. Freddie Mac and Fannie Mae were government creations during the 1930’s. Fannie and Freddie could borrow money at a discount because of the general idea that the government was solidly behind the debts if things got out of hand. They were restricted in the type of mortgages they could deal. Specifically they could not directly handle sub-prime mortgages.

But the complexion of the duo changed as they grew and began to make profits. Their officials took in huge salaries as well as bonuses. This pushed them on to grow even bigger. It has been alleged earlier this decade that they were not above moving the chess players in such a way that ultimately their executives gained. In 2007 the Chair of Freddie pocketed a neat sum of $18,289,575. The CEO of Fannie, Daniel Mudd got a 7% rise in salary also in 2007. Yet in the same year the company showed a loss of $2.i billion and its shared tumbled by 33%.

The foreclosure crisis is galloping ahead with no signs of slowing down. Due to this foreclosure mess Freddie and Fannie have suffered huge losses running into billions of dollars. If their assets were correctly marked according to the prevailing value one if not both would have gone bankrupt by now.