07 September 2008

That didn't take long

It was pretty much inevitable.

"The Treasury Department on Sunday seized control of the quasi-public mortgage finance giants, Fannie Mae and Freddie Mac, and announced a four-part rescue plan that included an open-ended guarantee to provide as much capital as they need to stave off insolvency."

But will this really help make things better in the short-run? I don't believe so. The downward spiral of housing price declines will continue nonetheless because the supply of homes is simply too great. When the new equilibrium is reached prices will settle and stay low for quite a while.

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