Buffet on the economy and Mae and Mac

MSNBC has reported that Warren Buffet is predicting that the feds are going to bail out Fannie Mae and Freddie Mac. Sorry Mr. Buffet, I think I blogged about that likelihood last week. The only problem is that the government will probably not step in soon enough. FM and FM are bleeding red right now.

About half of the mortgage debt in the United States is held by Fannie Mae, and Freddie Mac, and they are the largest source of funding for home mortgages. The increased number of defaults, is cause for concern. Losses between April and June of this year, for the two companies totaled $3.1 billion, and fear is mounting by investors that losses will continue to grow.

Buffett went on to say, in areas where there was a real estate bubble and banks became heavily involved in the housing market, more banks are likely to fail.

Buffet also went on to say:

The economy continues to be in a recession, by his definition, and will continue to be for at least several more months.

When Buffet talks, I do listen, but I find this extremely optimistic. Heck, the Bush Administration's official position is that we are not in a recession. (Yeah, right!).

Buffett said it’s likely more banks will fail, especially in areas where there was a real estate bubble and the bank got heavily involved in the housing market.

I agree. In fact, Washington Mutual bank in California is sitting on billions of sub-prime loans. They're my bank, and I'd like to think that they have everything under control, but the truth is that we, the general public, are always the last to know.