Critics of the federal government’s takeover of mortgage finance giants Freddie Mac and Fannie Mae say the action could end up costing taxpayers an enormous sum. Iowa Senator Chuck Grassley, the top-ranking Republican on the Senate Finance Committee, says it’s not a move he wanted to see made.
Grassley says, "Obviously, if you consider the fact that I voted against the bill that gives the Secretary of the Treasury the authority to do what’s he’s done, I would feel that it was not the right thing to do." Still, that bill passed overwhelmingly and what’s done is done, he says. Grassley says he understands why the Secretary chose to use this new tool to help bail out the nation’s crippled housing industry and he hopes it will end up being a positive move for the country.
"If you compare this to the deflation of the 1980s when there was billions of dollars invested in farm land, you would find at that period of time that bankers and farmers ate a lot of that debt," Grassley says. "It’s not a whole lot different from the housing." If all goes as planned, the buyout will make home loans more affordable while slowing the rate of foreclosures.
Still, some estimates show the move could increase the national debt by as much as five-trillion dollars. Grassley suspects more of the burden will fall on the individual banks that made risky loans that shouldn’t have been made, not the taxpayers.
"The market’s going to work through most of this and the purpose of the Secretary of Treasury taking the action that he’s taking is to take some of the edge off," Grassley says. "A great deal of this is going to be done through the private sector and there’s going to be an awful lot of money lost by a lot of irresponsible borrowers and by a lot of irresponsible lenders."
Markets in the U.S. and around the world are responding favorably to the move. President Bush says he’s pleased with the takeover but says it’s not a "bailout’ and instead calls it a "stabilization.’