Monday, July 14, 2008

What would happen if...

....we simply allowed Fannie Mae and Fredie Mac to fail, instead of spending billions of dollars to bail them out? Well, we'd simply end the era of granting certain mortgage lendors special federal privileges, and then mortgage lending would return to banks and other mortgage lendors, who would in turn start issuing loans more in the way that car and business loans are processed.

Now the last time I checked, the paperwork was more straightforward, the approval process more streamlined, and the interest rates were lower on car loans, despite the fact that automobiles are depreciating assets, which would ordinarily result in higher rates and more paperwork.

In other words, the private sector is handily beating the government/private concoctions known as Fannie Mae and Freddie Mac, and maybe, just maybe, we ought to think twice about whether it's a smart idea to bail out these monstrousities.

Not that it'll happen, but I can dream, can't I?

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