Monday, September 29, 2008

The Fannie/Freddie Conservatorship seems to be working OK

Let' see:

-Interest rates on conforming loans have dropped substantially, helping both homebuyers and sellers in the conforming market. Underwriting standards, though., remain more stringent (good in the long run, perhaps not so good in the short run).

-Senior management got removed without golden parachutes

-Shareholders get largely, but not entirely, wiped out

-The taxpayer, holding 80 percent of the company, gets susbstantial particiation in any upside (which in F&F's case, I think likely).

On net, this looks pretty good. It also looks kind of like Sweden's temporary nationalization of its banking system in 1992, which worked pretty well.

1 comment:

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