A Wisconsin economist says more federal bailouts may be coming. Dr. Mary Schranz is an instructor in economics at Madison Area Technical College. She notes the federal takeover of Fannie Mae and Freddie Mac adds to the national debt — and you know who ends up footing the bill. "The federal government already has a very large budget deficit, it has a large level of national debt," notes Schranz. "The federal government has to borrow money, in order to pay those bondholders in Fannie May and Freddie Mac. I as a taxpayer have to bear the consequences of the country borrowing more money."
Schranz thinks fears of a Fannie/Freddie failure causing a meltdown in the mortgage industry may have been overstated: "if Fannie Mae and Freddie Mac were not functioning, a typical borrower could go to a commercial bank or they could go to a credit union. They could go to other mortgage lenders."
Schranz also worries what may be next. "What comes to my mind are the automakers," she says. "What about Ford, what about GM, what about Chrysler? They are also losing money, and so will we now bail them out, and their shareholders as well?" That's already happened once, with the Chrysler bailout in the 1980s, and Schranz believes the Fannie/Freddie action sends a signal that taxpayers may be on the hook for another round of financial fixes.