Seattle Bubble Forum Archive

There's news today that Freddie and Fannie may be "insolvent". While I don't believe that to be technically true, it does raise a very interesting question. What if both (or either) of those mortgage giants had to shut the doors, even just temporarily?

It seems to me that cash or near cash purchases would suddenly become the only ones available. In such a case, I could actually agree with the beariest of the bears, that 70%+ declines would become possible (or maybe likely).

These organizations are the epitome of TBTF (too big to fail), but I'm starting to hear a lot of vocalization about how they are a raw deal for taxpayers. So who knows. I put the odds of either failing at less than 1%, but higher than 0%.

Government is in too deep in terms of propping up the housing market. No way they would let these companies fail as that in itself would slam the brakes on housing and open the recession flood gate.

I don't understand how mortgage rates are still as low as they are, given the obvious risk in the market right now. Borrowing is still far too easy.