The new bill has little to do with housing at the individual borrower level, and everything to do with guaranteeing Fannie and Freddie’s 6 Trillion in bonds and second party guarantees.
Our lenders – China, France, Germany, Singapore et.al. hold in the neighborhood of 2 Trillion in bad Fannie/Freddie paper. As the underlying mortgages go bad, the mess becomes international in a big way – remember these two GSE’s are leveraged about 40 times – each dollar loss on a mortgage loses 40 dollars in bond equity. The bill just gave a blank check from the fed to inject whatever capital the GSE’s need to stay solvent. In fact, the treasury can buy common or preferred stock at their descretion to prop up these two boat anchors.
Congress just put you and me – the tax payers on the hook for potentially 5 trillion in bond guarantees. For a group that claims to be capitalists, they sure look like Lennon style socialists.
These idiots cannot really believe that this will maintain housing prices at double their economic value and save the bad mortgages from going under while america spirals down into a serious recession. God help us all