Residential real-estate market to strengthen as Federal Government provides the floor for Fannie Mae and Freddie Mac’s insolvency – what happens to budget deficit
Paula Rabke
Jul. 10, 2008

Fannie Mae and Freddie Mac are going insolvent. The stock chart patterns are telling a Bear Stern type capitulation of the both perhaps within a month.

According to media sources, the Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter, as the stock prices of both companies continue to fall sharply. The talks have become more serious recently given the financial woes of the shareholder-owned, government-chartered companies, whose stability is vital to the functioning of the nation's housing market.

But how can that be bullish for the residential real estate market in the short run? Well there lies the catch. The Federal Government is planning a total bail out of the mortgage giants through creation of enormous liquidity.

That can bring in a trillion dollar in the mortgage market and rates can tumble like never before. It will be a win-win for Senator John McCain in November. On the long run however, the budget deficit will rise by 10 to 15%.

Residential real-estate market to strengthen as Federal Government provides the floor for Fannie Mae and Freddie Mac’s insolvency – what happens to budget deficit
Paula Rabke
Fannie Mae and Freddie Mac are going insolvent. The stock chart patterns are telling a Bear Stern type capitulation of the both perhaps within a month.
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