I was thinking the other day about how, as I understand it, Fannie and Freddie were created to allow lenders lend more money. The customer-facing lenders make loans for houses, and then Fannie and Freddie use tax dollars to buy those loans, so the retail lenders can lend more money.
Seems like that essentially created a huge amount of wealth in the form of real estate value. If there were no Fannie and Freddie, then it would take those retail lenders a longer span of time before they could lend after writing a loan because their risk would be greater. There'd be less they could lend. They've been operating for a long time now so if they hadn't been around all this time, I think we'd see real estate values MUCH lower than they are now - because the bottom line of value is what the buyer will/can pay and what the seller will accept.
Could you imagine what would it would be like if the $500-750k homes in your area were actually selling for more like $25k? I mean it would be very different. Maybe it would be worse, maybe it would be better.
Anyway, there were some of the New Right libertarian people proposing to let Fannie and Freddie die a couple weeks ago, and I think if that had happened, the adjustment period would have been extremely painful and long-lasting.
Now whether or not we're going to enter what is basically an even longer, 100+ years period of adjustment as we put public money into maintaining a public bubble, I dunno, but they seem to get by okay in Japan...
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Seems like that essentially created a huge amount of wealth in the form of real estate value. If there were no Fannie and Freddie, then it would take those retail lenders a longer span of time before they could lend after writing a loan because their risk would be greater. There'd be less they could lend. They've been operating for a long time now so if they hadn't been around all this time, I think we'd see real estate values MUCH lower than they are now - because the bottom line of value is what the buyer will/can pay and what the seller will accept.
Could you imagine what would it would be like if the $500-750k homes in your area were actually selling for more like $25k? I mean it would be very different. Maybe it would be worse, maybe it would be better.
Anyway, there were some of the New Right libertarian people proposing to let Fannie and Freddie die a couple weeks ago, and I think if that had happened, the adjustment period would have been extremely painful and long-lasting.
Now whether or not we're going to enter what is basically an even longer, 100+ years period of adjustment as we put public money into maintaining a public bubble, I dunno, but they seem to get by okay in Japan...