Think about the impact it would have on everyone else though. These companies aren't small companies. They're huge conglomerates that play major parts in peoples financial situation.
Sometimes taking risks is the best way to profit. And they're not called risks for no reason. And I doubt the company wanted to lose money intentionally..
The problem is these companies, with the implicit backing of the federal government take unnecessary and huge risks knowing they will be bailed out if they fail.
It's not "risk" if they only profit from the upside and don't take their medicine on the downside. Heads they win, tails you lose. :)
It isn't fair to paint Fannie/Freddie with the same brush that you'd use for (say) Bear Stearns.
These guys have been serving as the de-facto buyer of last resort for all of the bad debt that other banks have accumulated. They're acting as the US mortgage-banking safety net, and as such, have knowingly taken on a huge amount of bad debt that other commercial banks wouldn't touch. If it weren't for Fannie/Freddie, the mortgage crisis would be much worse than it is.
(That said...if they had the good sense to raise their lending standards back in 2003, we probably wouldn't be in this mess.)
Actually if it weren't for the actions of Fannie/Freddie, the mortgage crisis would have needed to be dealt with sooner. By F/F taking on all the toxic loans that the mortgage banks wanted to dump, they allowed the problems to increase in size and scope thus prolonging the bubble much longer. All this quasi-government intervention does is to distort the true market. I want transparency in government and I want it in business. When you allow these mortgage banks to fail on their own (no safety nets), you clear the system of inefficient players and allow the market to adjust.
I'm all for free enterprise. You take risks, you make some smart moves, and you profit. You take another risk, you make some mistakes, you lose, and you can start over (and learn). You don't keep doing it like these banks did (I don't even know if you can call them mistakes, more like reckless disregard). Like degenerate gamblers who got their line-of-credit extended, they double-downed and lost.
Think about it, the average US citizen's safety net is quite small. Get sick, get dropped by insurance, lose your job and you're basically on your own. We're told to buck up, stop whining, take responsibility, and work harder. Fine, but don't tell me these companies need our sympathy and help. They profited handsomely during the run-up by making risky loans and lobbying for tougher bankruptcy laws.
There's no easy answer. Bail them out, the dollar plummets and the economy goes to shit. No bailout, the financial market freezes up and the economy goes to shit. I'm leaning towards no more bailouts. At least then we might be able to address the root cause, which I think was reckless risk taking and financial engineering, with the perpetuated belief that the US government (tax payers) would be the ultimate safety net.
Taxes. Someone has to pay for the government bailing them out. And because it is essentially a blank check with no oversight, they'll make the mistakes again. And again. And again.
There's a reason it's called "risk". Because you have a chance of FUCKING IT UP!
Well, exactly. For example, I am English. This means that I am a shareholder in a bank. How does this follow? Because the UK govt spent 50 billion pounds (about a hundred billion dollars) of taxpayer's money bailing out a subprime mortgage lender called Northern Rock. 50 billion pounds is an awful lot of money - it's about double the annual defence budget. Now, I'm not even a Northern Rock customer, I'd be happy if they'd gone bust because that, while a bitter pill for some, would have brought some sanity back to the housing market (yes I am a homeowner). Instead, we have this huge debt on our collective hands.
Sometimes taking risks is the best way to profit. And they're not called risks for no reason. And I doubt the company wanted to lose money intentionally..