There is lot of rending of garments and gnashing of teeth that the FF bailout will cost something like $300 billion, including the implicit subsidy to mortgages that are guaranteed (the cash flow cost right now is something like $130 billion). So for an economy whose GDP is roughly $14.5 trillion, this is a little more than two percent of GDP.
To whom does the money go? Given that shareholders were essentially wiped out, it goes to largely three places: holders of Fannie and Freddie debt, the US Treasury (which owns preferred shares in the companies) and homeowners. I am curious how this shakes out distributionally. Clearly, homeowners are on average richer than renters, and bondholders are richer than non-bond holders, so the bail-out must have some regressive implications, but it is not clear to me how much so. It is at least worth thinking about.
To whom does the money go? Given that shareholders were essentially wiped out, it goes to largely three places: holders of Fannie and Freddie debt, the US Treasury (which owns preferred shares in the companies) and homeowners. I am curious how this shakes out distributionally. Clearly, homeowners are on average richer than renters, and bondholders are richer than non-bond holders, so the bail-out must have some regressive implications, but it is not clear to me how much so. It is at least worth thinking about.
2 comments:
Although it may seems like a rounding error in the bailout, there are other beneficiaries who certainly did a mite better than any individual mortgage holder...
The top six executives of the two mortgage giants, Fannie Mae and Freddie Mac, received a combined total of $35.4 million during 2009 and 2010. According to a newly issued report by the inspector general of the Federal Housing Finance Agency, the CEOs of both companies alone were paid a shocking $17 million over the past two years.
adding in the other Fannie/Freddie employees reduces somewhat the regressivity, but I suspect not by much.
I agree with what TStockmann said.
Post a Comment