"Federal Reserve Chairman Ben Bernanke floated a new idea to fix the troubled market for mortgages to large for Fannie Mae and Freddy Mac to buy. All the companies to securitize jumbo size mortgages but have the Federal government guarantee them.
Fannie and Freddie currently can buy mortgages only up to $417,000 and Congress, so far, hasn't acted to lift that limit, despite distress in that market that has made jumbo mortgages at "somewhat tighter terms and higher prices" as Mr. Bernanke put it."
Wow. Fannie and Freddy were set up by act of Congress to make it easier for working stiffs to get home mortgages. For this reason Congress limited to size of mortgage eligible for US government subsidy to $417K to prevent fat cats buying McMansions taking advantage of subsidies for working stiffs. $417K will buy one hell of a house in any market you care to mention. Why should Uncle Sam use my tax dollars to make it easier to finance rich people's houses? Let the fat cats pay market rates for their houses, just like real people.
Presumably Mr. Bernanke was attempting to ease the pain for banks and brokerage houses who are getting burned in the sub prime crisis. I'm agin it. Let the speculators take some solid losses. That will teach 'em not to drive up the price of housing by speculation.
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