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September 6, 2012

France Nationalizes Second Largest Mortgage Lender, More to Come



France picked a Saturday to nationalize the second largest mortgage lender in the country.  Had Zero Hedge not reported this story, many people may not have known about this situation.  In fact, France's actions, based on history, can tell us that there is more trouble ahead for the large euro economy.

When I read this article, I could not help but to think of Fannie and Freddie.  Our government nationalized these mortgage lenders roughly four years ago (almost to the day).  Like France, our government chose to commit such an action on a weekend.  Unfortunately, the similarities may go further in terms of market performance.

Weeks after the Fannie/Freddie nationalization, the stock market and the economy in the United States, went  into total free fall.  Another bank bailout that happened last year, Belgium's Dexia, had a very similar relationship to the European markets as they entered the first round of turmoil stemming from a continent wide sovereign debt crisis.

Is the next round about to hit Europe?  We believe so.  Market watchers in France must be knowledgeable of the $100+ billion cost the American taxpayers took on Fannie and Freddie.  The nationalization is also an indication that the housing market in France may be closer to that of Spain's.  If so, France could be the next country to garner crisis status.

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