There is lot of rending of garments and gnashing of teeth that the FF bailout will cost something like $300 billion, including the implicit subsidy to mortgages that are guaranteed (the cash flow cost right now is something like $130 billion). So for an economy whose GDP is roughly $14.5 trillion, this is a little more than two percent of GDP.
To whom does the money go? Given that shareholders were essentially wiped out, it goes to largely three places: holders of Fannie and Freddie debt, the US Treasury (which owns preferred shares in the companies) and homeowners. I am curious how this shakes out distributionally. Clearly, homeowners are on average richer than renters, and bondholders are richer than non-bond holders, so the bail-out must have some regressive implications, but it is not clear to me how much so. It is at least worth thinking about.
To whom does the money go? Given that shareholders were essentially wiped out, it goes to largely three places: holders of Fannie and Freddie debt, the US Treasury (which owns preferred shares in the companies) and homeowners. I am curious how this shakes out distributionally. Clearly, homeowners are on average richer than renters, and bondholders are richer than non-bond holders, so the bail-out must have some regressive implications, but it is not clear to me how much so. It is at least worth thinking about.
