Fannie, Freddie Bailout To Add 5.4 Trillion to Debt

Hi All,

The Congressional Budget Office is reporting that the balance sheets from the Fannie and Freddie takeover may have to be added to the federal budget. Provided this is correct, the US will have an additional $5,400 BILLION in liabilities.

“The two mortgage companies have between them $5,400bn in liabilities, equal to the entire publicly traded debt of the US, alongside mortgage-related assets of about equal value. These will now all be accounted for by the CBO, although public accounting rules mean that its tally of US government debt may not necessarily increase by $5,400bn”. (Financial Times, 9/9/08).

The reporting here is a bit equivocal, but the situation may soon become very good for a tax increase.

Whats most bothersome about this situation is that, provided a tax increase is necessary, the little guy will bear the brunt of the mistakes of a few CEOs. Why should taxpayers suffer the losses in bad times and CEO’s take the profits in good times?

Thanks,

James