Fannie and Freddie are examples ill-conceived ideas that have cost us more than then they benefited us and continue to exist only on the public largess.
Books will be written on the subject, and history will be forced to conclude that a shareholder owned corporation, with a profit motive and fiduciary duty to its owners, can not also be invested with the ability to bind the Government of the United States of America. There can be no such thing as a “quasi” Government agency. To often the public trust, due the tax payers of the Union, directly conflicts with the desire and responsibility a firm has to consistently produce earnings. That being said, the unfortunate fact is, Fannie and Freddie do exist, they did bind the United States and, like a stranded hiker in a harsh environment, they had to be rescued at great risk and expense to all.
These entities carried
These entities carried the implied backing of the US Government, once insolvency became inevitable, there was no other viable option for the Treasury other than bail-out. (That is unless one considers loss of faith in the credit of the US, utter economic collapse and long term, global depression a viable option.) The question handelsregisterauszug online became how to engineer the rescue while maintaining a semblance of respect for the free market, capitalist system. Paulson nailed it.
First he took 80% of the equity, this devastated and demoralized the shareholders and was necessary in-order to dissuade future investors from putting money into foolish investments that are bound to fail, and also to maintain the important “moral hazard” that must accompany all equity investing. However he honored any debt that could have been considered an obligation of the United States. In this way he maintained faith in the US Government as a borrower, a very important aspect of world economics. As-for the preferred shareholders who were neither equity nor pure debt investors he left them with some hope for a return on their investments. By leaving 20% of the stock intact, if the companies return to profitability some years hence, they stand a chance for some remuneration. Then he inserted warrents that will make sure the taxpayer is eventually made whole.
I wish this bail-out didn’t have to happen, yet I was not ready to revert to a primitive barter system of commerce where motor oil, bullets and cigarettes were currency and characters out of Mad Max ruled the streets of my neighborhood. So I am grateful that, at this critical juncture in our economic history, a grown-up was in charge at Treasury. Mr. Paulson did this bail-out right.