Finally, finally, finally, the federal government has stepped in to take over the GSEs -- Fannie Mae and Freddie Mac.
This is great news for the recovery of the housing market, the stock market, the credit market and the overall U.S. and global economy.
It is NOT a $5 trillion expense by U.S. taxpayers. It would only be a $5 trillion expense if every loan was unpaid and no money was recovered from the underlying assets. The actual expense to U.S. taxpayers will be much smaller.
And when you consider the tremendous benefit this will have on the economy, this action is a tremendous investment for U.S. taxpayers in the future of our economy. Not taking this action would likely cost the broader U.S. economy much, much more.
This also means the fall in home prices will be shorter and not as severe as it would have been without this action.
As Daniel Alpert, managing director at the investment bank Westwood Capital, told the Associated Press: "There's no doubt in my mind that this will stabilize the mortgage market."
In July and August, we have seen many signs that the housing market may be near the bottom in some areas. However, the remaining concern has been the mortgage market. This is a step toward alleviating that concern.
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