Econ Club: It's about logic, not emotion.

Under the guise of Econ Club, I have sat in many of bars alongside peers and professors, attempting to solve the world’s problems with economic logic. Couched primarily in economic topics, attendees are encouraged to be blunt, using logic not opinion to discuss current events. It is because of the success of these meetings and encouragement from past participants that I am moving Econ Club into blog form. As such, post articles, comment on them and of course keep a refreshing beer nearby.

Monday, July 14, 2008

Freddie Mac and Fannie Mae
The muddle-through approach
Jul 14th 2008From Economist.com
America’s government tries a quick fix for the intractable problems of Fannie Mae and Freddie Mac

http://www.economist.com/daily/news/displaystory.cfm?story_id=11735141&fsrc=nwl

I am curious to hear people's thoughts on how serious the situation is concerning Freddie and Fannie. What will the companies look like in a year out, do you think that the government should have created the situation coined today as "private profits, socalized lossess"?

1 comment:

Ian said...: Both should be allowed to fail if necessary. The investors who bought or chose to guarantee these risky mortgages pay the price for taking the risk. If Fannie and Freddie fail, there is a short-run hit felt by everyone -- tighter credit, declining dollar, etc. But in the long run, it's better than forcing taxpayers to bear the downside risk of risky lending. It also sends the right signal to investors: no gov't guaranteee on Fannie/Freddie assets.; July 17, 2008 at 9:26 AM