Mike Kennedy weighs in on the Fannie/Freddie takeover and what it might mean for the Deep Creek area ..

As I've alluded to earlier if anyone can be counted on to give you the real story, it's Mike Kennedy. Here, it seems he has given us another objective view of some of the potential changes we might see in the local market. The only thing I might add is that the takeover plan as it is currently structured allows Fannie and Freddie to take on more loans in the short term (loans no one else will currently buy) but also requires them to become smaller in the longer term. The first question that came to my mind was is this another Washington band-aid solution that doesn't address the real problem and simply delays the inevitable? Ignoring the fact that few in Washington could be trusted to balance a checkbook, ask yourself who is going to buy these loans when Fannie and Freddie are required to start selling them off at a rate of 10% per year in 2010? Are we really solving anything or just delaying the pain of pushing the reset button and cleaning up the entire mess right now? Of course by 2010 Mr. Bush and Mr. Paulson will be long gone and it won't be their problem to deal with will it?

So yeah, after all else failed, the government is essentially stepping in and subsidizing cheaper loans in a effort to get people with record levels of debt to borrow even more. As I have said before, I may never understand how more borrowing solves a problem due to over borrowing, isn't that like stuffing your face in an attempt to lose weight? I want someone to say step away from the feed trough, put down that fork, look in the mirror and get real! I guess that is neither here nor there at the moment, we are just supposed to follow the herd and spend, spend, spend while enjoying the lower interest rates for as long as they may last. Wasn't that the same story we heard in 2002 as well? And guess what, we are in a bigger mess now than we were then. Shocking, huh?

How long rates may actually remain lower though is anyone's guess because it is basically out of our hands at this point and depends directly on the rest of the world being willing to send us their money at low rates of return. If Japan and China say wait a minute this doesn't really look like a good deal to us afterall, the short term decline in interest rates will suddenly disappear just as quickly as it appeared. In any case, beware because just when you think we're in the clear, 2010 will be here and no one will want to buy what Fannie and Freddie are selling and then we're two years down the road from today and nothing has really changed.

In a related story from CNBC, we may be running out of options to prevent recession. That Dan Mitchell sounds a lot like someone else I know.

Don't forget to check back to Dan's Deep Creek Blog for future updates.