It’s Bad Out there. Not BAD bad. Just Kinda Bad

Everyone is all up in arms about Fannie Mae and Freddie Mac.  The big concern on Wall Street is that these two mortgage giants are going to collapse under the weight of all these bad loans that they have been accumulating over the course of the past five years.  If they did happen to close their doors, it would cause a catastrophic chain reaction across the mortgage, finance and real estate markets that would wreak havoc the likes of which our country hasn’t seen in some time.

And the sky would fall on our heads.

Okay, there is some credence to the accusations that Fannie and Freddie could be undercapitalized.  However, a couple of weeks ago Treasury Secretary Hank Paulson got a bill approved that would es­sentially back-stop any losses that Fannie and Freddie endured.  Speculation is swarming around whether or not the two companies will need to use this governmental money.

The fact is, unless you have bought stock in Fannie and Freddie, I wouldn’t lose any sleep over it.  Whether they use the money or not, they will survive; our government can’t stand to lose them.  Fees are being increased in order to accommodate for loan losses (translating to incrementally higher loan costs to the consumer).  Business will continue as usual, and they will be adequately capitalized for the next big wave of lending.

The mortgage industry will survive to lend another day.

Another source of stress is the growth of the FDIC’s “problem list” of banks.  It has grown to 117 banks from 90 just 2 months ago.  This is a bad trend for sure, but nothing worth building a bomb shel­ter over.  To give a basis of comparison, back in 1991 when the Savings and Loan crisis happened, there were more than 1,400 financial institutions on the problem list.  So, we as a country are not doing all that bad in this down cycle.

Down payment assistance programs are staring death in the face.  As part of the recent housing reform bill, all these programs are being thrown in the garbage as of October 1st, 2008.  So, if you’re looking for some free money from one of these programs, I’d suggest you get moving with extreme quickness.

Gross Domestic Product, a standard measure of how quickly our country is growing, was revised up­wards for the 2nd quarter of this year from 1.9% to 3.3%.  This is a significantly bigger number than most analysts expected, implying that our economy isn’t suffering as bad as the media would have us believe.  That, or people are just spending money regardless of their changing circumstances (which is most likely the case).

And we’re inching closer to the presidential election.  McCain shocked the world when he chose the first female GOP vice-presidential pick in Alaska’s Sarah Palin.  Obama continues to inspire without rest as he gave a rousing speech to accept the democratic presidential nomination last night.  I hesitate to speculate which candidate would mean improved interest rates, but with a black man on one side of the ticket and a woman on the other side, we’re making history one way or another this year.

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