US Economic Intervention At It’s Finest.

On Friday right before markets closed, news was released by an anonymous but credible source about the Monday takeover of Fannie Mae and Freddie Mac by the Treasury Department. The two monster corporations, spawns of irresponsibility created by the US Government in the past, are once again officially part of our tax bill. In the past, when these two large corporations were allowed to go private (Fannie Mae first, then Freddie to create competition), investors could feel safe knowing that they would never go under due to help from the Treasury.

FRE was at it’s peak $70 in 2004 and FNM was almost $90 in 2001. Now people involved in the free market will be punished for FRE and FNM’s fiscal mismanagement and dependency on the treasury. On Monday, the stock is expected to plunge to around $0.25 per stock based on dilution of stock upon the Treasury’s capital infusion. The people paying the price for this decision will be the American taxpayers and Fannie Mae and Freddie Mac stockholders, those benefiting are the irresponsible ones miscalculating their money and overspending (both the corporations themselves and the homeowners who couldn’t afford their homes).

Together, Fannie Mae and Freddie Mac own or guarantee almost half the home loans in the country’s roughly $12 trillion mortgage market. You can read the history of these two monsters here