Fannie and Freddie Increase Public Debt by $5 Trillion

Bullionvault.com
"Fannie's and Freddie's mortgages are financed mainly by bond issues, and the bonds are sold to the world's financial organisations."The Economist" magazine has for years been commenting on the strangeness of these bonds' status, because although officially they are NOT government backed, they have been treated by everybody as if they were.

Their status is now important because their solvency has been called into question both by the markets and by William Poole -until March this year a full member of the US Federal Reserve. Poole is notable for being a lone dissenting voice on the Fed's
Open Market's Committee. We don't know if he's a loose cannon or a beacon of truth.

The protective reaction of the Treasury certainly suggests a national
guarantee stands behind Fannie and Freddie. Yet the strangeness of the bonds - their quasi-private status - means they are not on the public accounts. That is wrong.

In accepting responsibility for these liabilities the US government has catapulted its public debts from $10 trillion to $15 trillion.

The $100,000 of debt owed by every American family, and borrowed on their behalf by successive US governments since 1980, is the
unmentionable whore in the family of US fiscal competence. A 50% increase in it overnight is very, very serious, especially when it is known that the underlying asset backing is already insufficient and is still falling." (7/14/08)

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