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Fannie and Freddie Symptoms of Larger Problem

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"Socialism for the rich and capitalism for the poor" -- The Real News Network's Matt Palevsky spoke with Chief economist at the AFL-CIO, Ron Blackwell

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July 15 -- The Federal Reserve and the Treasury announced steps on Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threaten their financial survival. Congress has been asked to approve a sweeping rescue package that would inject billions of federal dollars into the faltering companies. The Federal Reserve has also said that it would promote up to $300 billion in short-term, low-interest loans for Fannie and Freddie, expedited authority from Congress to expand its current line of credit to the two companies and to make an equity investment in the companies if necessary. Adding to the financial turmoil over the weekend, the FDIC took over operations of IndyMac, a failing bank with over 265,000 customers.

Chief economist at the AFL-CIO Ron Blackwell believes that while bailing out Fannie and Freddie is important, politicians shouldn't lose sight of the broader economic crisis: "The question is: what are they going to do beyond that to put a floor underneath the housing crisis to do something about the two million people that are going to lose their homes over the next 18 months if we don't do something, to do something about the millions of workers that are losing their jobs every year."

Blackwell believes that the falling economy is hitting working families much harder than many politicians are willing to acknowledge. It is hitting families hard especially because the recovery since the 2001 recession has been very slow, and that while it's "a very acute crisis", it is "against the backdrop of a generation-long stagnation of wages, and it has its roots in the fundamental economic policies of this country over the past 30 years."

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