Watch Out for Freddie Mac


Many readers believe there is a sinister conspiracy behind our government’s economic policy that is part of an active plot to weaken the populace and ease the creation of a one-world government that dominates all people. The thread of this thought is woven deeply enough in Western society that I used this concept as the theme of my novel, the 65th Octave. I doubt that there is really a mysterious group that has been secretly working for generations to take over the world, but this does not matter. Controllers working without a conspiracy are bad enough. One such group of these controllers I have warned about over the past two years are those who run Ginnie Mae and Freddie Mac. You can read one of these past warnings at http://www.garyascott.com/archives/2000/06/04/2/

Now you have most likely been reading how and why the president of Freddie Mac was fired for perhaps "cooking the books" and why the CEO retired and chief financial officer resigned. Criminal investigations have begun. Here is why problems at this institution creates such concern. We are in the middle of a traditional 12 to 15 year Wall Street bear cycle and in the global economy is in recession. Such downward trends are normal and have been taking place almost since industrialization began. In the middle of each of these cycle there has always been a bank shakeout, the last being the Savings and Loan debacle combined with the fall of numerous large U.S. banks.

Now Ginnie Mae and Freddie Mac, in recent years have been making the same errors, such as reducing quality of loans and increasing overheads. What is so vital to our economy is that these institutions buy mortgages from lenders and sell them to investors. This process keeps plenty of cash flowing to home equity borrowers. Should these institutions fail the fiasco will shake up the home lending industry and make mortgages tougher and more expensive to obtain. The loss of liquidity at the home owner level could break the back of consumer spending which is the mainstay that keeps the U.S. economy plowing ahead during difficult times. Watch events as they unfold and expect bad news to have negative consequences on Wall Street.

Until next message, may you always be in control.

Gary


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