The "Bailout of Fannie Mae and Freddie Mac" may exceed $500 billion. The spinsters estimate $0 to $25 billion. The sad commentary in all of this is that the American public is not outraged at Congress for committing to this unbelievable bailout. I have the benefit of living in the Southwest in the 1980’s when we experienced a subset of this national problem. We saw housing decline by 30-60%. I knew people who had to bring substantial funds to closing just to sell their houses, negative equities. The complacency of the American public has in essence endorsed the actions of Congress in spending our children’s money. Why should those of us who did not buy houses we couldn’t afford, pay for those who did? We are not yet half way through this debacle.
The number of banks in the U.S. in the ’70’s was about 14,000. Today that number is about 7,000. Mergers and acquisitions account for most of the reduction. When you hear that there will be less banks fail than the ’80’s, keep in mind that the issue is the amount in assets failing rather than the number of banks. The FDIC has about $49 Billion after the Indymac Bank failure. They are guaranteeing over $13 Trillion or about .35% of the total. Houston we have a problem!
Energy growth must be viewed in terms of BTU growth, not barrels of oil or mcf of gas. This measurement is about pure energy. The globe (and the U.S.) continues to increase its usage of energy. We must pursue ALL forms of energy production. Some would tell us to focus on wind or solar, but we need it all. If this were not an election year, we might get an open and frank dialogue in Congress.
What can you and I do about this? Invest in hard assets as I have mentioned previous writings. Reduce your energy consumption. BTU’s are going to cost you more whether they be dominated in gallons, kilowatts, or mcf’s. The perfect storm clouds continue to gather.