- FNMA (Fannie Mae) and FHLMC (Freddie Mac) were essentially taken over by the federal government. They process about 50% of all the mortgages taken out in the United States ($5.3 trillion). What used to be these companies will now be a Federal Agency under the Treasury Department. Stockholders in these companies essentially lost their entire investment.
- AIG, the largest insurance company in the United States, with 20 million customers worldwide, has reached an agreement with the Federal Government where AIG will have access to $85 billion worth of credit, to be paid back at 11%+ (a VERY high rate). The Federal Government will own 80% of AIG.
A Question
What the heck happened to letting the market sort things out? This seems like a HUGE government takeover of business. So far, I've heard almost no objections from conservatives to this massive government involvement. They're strangely silent when I would expect them to be squealing.
An Answer
The truth is, the feds simply had to act. As bad as it is to gobble up these entities into the federal government, both these entities, had they been allowed to fail, could have thrust the world economy (not just the U.S.) into a 1930s-style depression. So, even though the medicine doesn't taste good (surely it will cost us taxpayers plenty), it has to be done.
Now let's hope we get to the bottom of how it happened, and how to prevent it next time.
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