Fannie Mae seeks $15.3 billion more in aid: Fannie Mae needs another 15 billion dollars worth in federal assistance, which brings them to a total of already 75 billion dollars. Along with needing more money, Fannie Mae was previously warned of their losses, and it will continue into 2010. Not only is Fannie Mae having issues but their sister company Freddie Mac “is turning out to be one of the most expensive aftereffects of the financial meltdown”. With both companies the total bill will be around 126 billion dollars. Unemployment is still high, and millions of people are still losing their homes through foreclosure “Fannie Mae reported Friday that it lost $74.4 billion, or $13.11 a share, last year, including $2.5 billion in dividends paid to the government. That compares with a loss of $59.8 billion, or $24 a share, a year earlier”. Fannie Mae was seized by federal regulators in 2008 and at the end of 2009 the Obama administration promised to cover their losses until 2012. Fannie Mae and Freddie Mac play an extremely important role in the mortgage market; they purchase and sell nearly half of all mortgages. Since the real estate market crashed, they have really been suffering “During the most recent quarter, Washington-based Fannie suffered $11.9 billion in credit losses and a $5 billion write-down for low income tax credit investments”
Friedman believes in separate economic and political activities. He believes the economic freedom in an overall part of total freedom. If you don’t have a free economy you don’t have freedom, and economic freedom leads to political freedom. Friedman believes that the economic and political system are not separate, they are a conditional relationship. The example we used in class is that people who have more money tend to have more freedom then those who don’t have money.
Ethical issue: If economic and political systems are separated, what happens when such companies like Fannie Mae and Freddie Mac need some kind of loan?
I believe that Friedman would not be against giving loans to such companies as Fannie Mae and Freddie Mac. Friedman believes that government should be dispersed, he imagines a fifth branch to the government, that an economy will serve to limit and disperse, the more freedom we will have , it will then limits governments influence. Friedman also believes that the government plays the role of the umpire. The government is there to regulate and serve the economy.
Subscribe to:
Post Comments (Atom)
http://www.msnbc.msn.com/id/35609531/ns/business-stocks_and_economy/
ReplyDeleteI agree that government should not be interfering with the economic sector, its only role is to regulate and serve as an umpire. The name of number one "Power House" was not given because of how successful the U.S. on the political stage but rather its the economy that helped us to be crowned with that name. Our economy is the sole reason that we have a voice on the world political stage. Therefore, it is evident to say that Friedman's theory about economic freedom leads to political freedom.
ReplyDeleteThese bailouts should stop because with these companies its going to keep going and going. I am not saying dont help anybody, but make concrete rules that there wont be a second time for a handout. Freddie Mac and Fannie May will keep on asking for money while giving out million dollar bonuses to their CEOs.
ReplyDeleteI think Friedman would disagree with government giving out loans because that makes them involved in the economy of the country. It also makes them part owners of the company. Friedman believes that in order to have political and economical freedom the two should be separate.