Failure Is Not An Option

The taxpayer strapped on more massive debt when the government announced it’s takeover of the troubled Fannie Mae and Freddie Mac institutions the other day. As a taxpayer, I hate it when I’m forced to shoulder someone else’s blunder. Where’s my bailout?

But the simple fact, like it or not, is that allowing these mortgage giants to fail was not an option. I’m pretty certain it isn’t going to be the last “bailout” we see in the short term either. It’s a fact the credit markets are in dire straits for myriad reasons. The real prospect of a catastrophic banking system collapse would be unimaginably worse. Why and how we got to this point is somewhat beside the point until we regain the integrity and stability the system needs.

This move wasn’t desirable to anyone but it was necessary. A benefit will be a reduction in mortgage rates which will help return some much needed liquidity to home lending. My favorite description of the takeover by a pundit was, “The fat tail risk of an Armageddon has been reduced.” Basically, that means immediate matters just got a little better.