What Happens if Freddie Mac and Fannie Mae Fail?
Freddie Mac and Fannie Mae are the two largest private corporations that own or back more than half the mortgage debt in the U.S. which amounts to more than $5 trillion. They recently became in danger of being insolvent due to lack of investor confidence which caused the stock prices to plunge.
What would happen if they collapsed? The government would print funny money causing inflation to skyrocket. Markets and industries would tumble. Being that we no longer manufacture anything, we would turn to foreign investors who would buy every stitch of property for sale and charge us rent to live here. Americans would be forced to regress to a futuristic apocalyptic time of horse drawn Hummers and chainsaw death matches in Van Cortland park for the rights to a loaf of bread (oh…sorry no carbs).
The cost of Grand Theft Auto XVII would force us to return to games like Pong and Donkey Kong (the Atari 2600 version not the Commodore 64 version). The children would be forced to quit school and work on bicycle electricity generators which will be providing power so we can watch our favorite game show “Food or No Food.”
We would be forced to eat irradiated Hot Pockets and Ramen noodles. Of course every big city would turn to riots after Federal Government was privatized and then purchased by the world’s largest corporation Lockheed-Mart. Facebook would become an underground resistance movement whose membership would be punishable by death or constant IM’ing by Tom asking you to come back to MySpace.
Luckily, the FED stepped in last month with an emergency rescue plan that allows them to 1.) pass legislation that would extend lines of credit on a temporary basis over the current billion $2.25 limit from the Treasury to Fannie and Freddie; 2.) giving the Treasury the option to buy equity in Fannie and Freddie; and 3.) granting the Federal Reserve Bank of New York the authority to lend additional funds to the GSEs.
Whew… that was close. To hear more apocalyptic doom predictions…AskRey.