Uncle Sam takes over country’s largest mortgage lenders

I’m a lit­tle unset­tled by this — well, more than a lit­tle I guess, or I wouldn’t be writ­ing a blog post about it.  But I have been think­ing about this ever since the news broke over the weekend.

Uncle Sam wants YOUR mortgage!

Uncle Sam is now the largest mort­gage lender — ever.  In a stun­ning — and dis­turb­ing — move, the U.S. Gov­ern­ment bought Fan­nie Mae and Fred­die Mac, “plac­ing the lia­bil­i­ties of more than $5 tril­lion worth [THAT’S $5,000,000,000,000 SPORTS FANS!] of mort­gages onto the backs of the U.S. tax­payer”, as Fox News Busi­ness puts it.

If you’re like me, a nor­mal run-of-the-mill Amer­i­can, you hardly know what it means for the U.S. Gov­ern­ment to buy out finance com­pa­nies.  Well, let’s go through it together, shall we?

• The U.S. Depart­ment of the Trea­sury receives $1 bil­lion in senior pre­ferred stock, with a yield of 10% per year
• The U.S. Depart­ment of the Trea­sury also receives 79.9% of the com­mon stock of each company
• The worth of com­mon or pre­ferred stock cur­rently held by stock­hold­ers in the two com­pa­nies will be worthless
• All div­i­dends in Fan­nie Mae and Fred­die Mac will be eliminated
• All com­pany polit­i­cal lob­by­ing will end

I don’t know about you, but I don’t rel­ish the thought of hav­ing to pay for some­one else’s home through higher taxes, which will prob­a­bly be the end result — espe­cially if Uncle Sammy starts feel­ing the pinch in losses.  Is it bet­ter than let­ting these busi­nesses floun­der?  I don’t know.  Maybe.  I guess time will be the decid­ing fac­tor.  In the short-term, at least, the mar­kets are respond­ing well to the news of the buy­out.

Let’s just hope this is not the start of a buy­out trend.  We def­i­nitely don’t need the Gov­ern­ment con­trol­ling every­thing.  Oh yeah, as a side-note, The Big Three automak­ers (GM, Ford, and Chrystler) are going to Wash­ing­ton this week to ask for mo’ money.  Want to know how much?  How’s $50 bil­lion each sound?

Man, oh man.  Things really are get­ting inter­est­ing.

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