reply on: Baby-Boomers are Loaded. Why Are They Not Spending? (The Economist) \ stacker news ~econ

pull down to refresh

41 sats \ 1 reply \ @Bell_curve 14h \ parent \ on: Baby-Boomers are Loaded. Why Are They Not Spending? (The Economist) econ

I consulted ChatGPT:

Freddie Mac, along with Fannie Mae, was placed into government conservatorship on September 6, 2008, not 2007. This action was taken by the Federal Housing Finance Agency (FHFA) in response to the financial crisis and concerns over the stability of the housing market.

Why the Conservatorship Happened

By 2007, the U.S. housing market was already showing signs of collapse due to the subprime mortgage crisis. Freddie Mac and Fannie Mae had heavily invested in mortgage-backed securities (MBS) that contained a significant number of risky loans. As housing prices fell and defaults surged, these assets lost value, threatening the solvency of both institutions.

In early 2008, Freddie Mac and Fannie Mae’s stock prices collapsed, and investors lost confidence in their ability to operate without government support. In July 2008, Congress passed the Housing and Economic Recovery Act (HERA), granting the FHFA new regulatory powers, including the ability to place the GSEs into conservatorship. By September, Treasury Secretary Henry Paulson and FHFA Director James Lockhart determined that both entities were insolvent and placed them under government control.

Key Aspects of the Conservatorship 1. Federal Government Control – FHFA took over the management of Freddie Mac and Fannie Mae. 2. Treasury Support – The U.S. Treasury provided up to $200 billion in financial backing through stock purchases and credit lines. 3. Dividend Payments – Under the agreement, Freddie Mac had to pay nearly all profits to the U.S. Treasury as dividends. 4. No End Date – The conservatorship was intended as a temporary measure, but Freddie Mac and Fannie Mae remain under government control today.

Aftermath and Impact • Freddie Mac and Fannie Mae returned to profitability in the years following the crisis, paying back the government’s investment. • Their role in the housing market remains critical, backing a majority of new mortgages. • Policymakers have debated ending conservatorship, but no definitive plan has been implemented.

Would you like more details on the effects of conservatorship or potential reform efforts?

9 sats \ 0 replies \ @siggy47 14h

Thanks. My memory is fuzzy about the sequence of events. I remember being at my mother in law's house for Sunday dinner and watching the announcement about Lehman Brothers.