Fannie and Freddie tab is $146B and rising fast!
Fannie Mae and Freddie Mac took over a foreclosed home roughly every 90 seconds during the first three months of the year. They owned 163,828 houses at the end of March, a virtual city with more houses than Seattle. The mortgage finance companies, created by Congress to help Americans buy homes, have become two of the nation’s largest landlords. For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office has predicted that the final bill could reach $389 billion.
Chancellor Angela Merkel’s government rebuffed U.S. calls to focus on bolstering growth over debt reduction, setting a course for conflict at the Group of 20 summit in Canada this week. “Nobody can seriously dispute that excessive public debts, not only in Europe, are one of the main causes of this crisis,” Finance Minister Wolfgang Schaeuble told reporters in Berlin today alongside Merkel. “That’s why they have to be reduced.” Germany is holding to G-20 commitments on exit strategies from fiscal stimulus, and “not violating international requirements for a coordinated strategy for sustainable growth,” Schaeuble said. “We will face up to the international debate and I think we can do that with a great deal of self- confidence,” he said.
Chasing bigger investment returns, the agency that manages Florida's $113.8 billion public pension fund wants to make far riskier investment bets. The state wants to reduce the pension fund's holdings in publicly traded stocks and bonds and triple its allocation to hedge funds and other private investments that are less liquid and harder to value. Several financial experts said that expecting higher returns with lower risk is as realistic as promising weight loss on an all-you-can-eat diet.
Sometimes the most interesting answers to financial questions come from scientific labs. A study published last week in the journal Current Biology found that the value you place on something is likely to go up when other people tell you it is worth more than you thought, and down when others say it is worth less. More strikingly, if your evaluation agrees with what others tell you, then a part of your brain that specializes in processing rewards kicks into high gear. In other words, investors often go along with the crowd because—at the most basic biological level—conformity feels good. Moving in herds doesn't just give investors a sense of "safety in numbers." It also gives them pleasure.
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