”The Senate on Thursday is expected to pass another continuing resolution that will fund the government until April 8 and avert a shutdown. But that won’t solve the need for a budget to fund the remainder of the fiscal year, much less address America’s true fiscal woes, says Boston University economics professor Laurence Kotlikoff.’
‘Including projected payments for Social Security, Medicare, Medicaid and other entitlement programs, America’s true budget gap is $202 trillion, or 14 times GDP, Kotlikoff says, citing CBO data. America is in “worst fiscal shape than Greece, Ireland, Portugal” or just about any other developed economy, he says. “The unofficial debts are staggering. Our implicit debts, the ones hidden off the books by Enron accounting show a much worse picture than the official debt.”
Yahoo.com
‘If there’s consensus on anything in America these days, it’s that “something” must be done about Fannie and Freddie, which have received nearly $160 billion in government aid since 2008. The problem is there’s little or no consensus as to just what should be done about the government-sponsored housing giants. “They all want to wind them down. There’s lot of plans and lots of talk but there’s nothing sold out there,” says Paul Muolo, executive editor of National Mortgage News.”
“You can’t pull that much liquidity out of the mortgage market without crashing it,” Muolo says. “If you crash it, home prices will fall by 50% and we’ll be in a worse situation than we were three years ago.”
I’ve often asked, how are people going to react to ’saving’ the GSEs when their SS and Medicare are being cut? We’re still looking at trillions to keep them going. This from the last link:
“The problem with winding down Fannie and Freddie is the GSEs buy about 70% of all mortgages originated in the U.S. and there just isn’t enough capital or risk appetite in the private sector to fill the void.”
This just isn’t so. Aren’t we told of corporations being flush with cash? Can’t the banks borrow from the Fed at rates much lower than mortgages?
It’s very simple; the GSEs are lending at low rates and down-payments on over-priced houses for political reasons. This keeps house prices higher than they would otherwise be. I don’t think anyone denies these are the reasons they are being kept alive.
Getting rid of the GSEs will solve the problem. Prices will fall, down-payments will go up, standards will be tightened, (all of which is going to happen anyway) and private lenders will be willing to take the risk on loaning against houses again.
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