If you don’t care about Fannie Mae and Freddie Mac or their boring true life story, I have a couple reasons why you should. These companies were formed, starting with Fannie, by FDR in order to support home ownership in America – that means subsidize folks and every year since 1938.
1. Tax payers now own Fannie and Freddie because they could not be allowed to fail.
2. The bailout cost stands at $130 billion and counting, more than all the other bailouts combined. And in this case, we won’t be getting our money back.
3. Unless there is a miracle, Congress will abolish these two mistakes and then create a new company just like them. Congress has already done it with college tuition loans.
4. The subsidies to these companies were entirely absorbed by the shareholders; there was never any additional home ownership created.
Folks, the cause of this great recession may have been greed but that is just people legally being people living the American Dream. That cannot be fixed – not in America and in the end, nowhere else either. The real causes, the ones we can control, were Fannie and Freddie, combined with completely failed government regulation. [Of course we need regulation but only transparency, not management because management entails guarantees.]
Here is the very best reporting I’ve seen on the subject. It’s a three part series by NPR which you can read or listen to at the links below – about 7 or 8 minutes each.
People have been arguing that these companies were wrong headed for decades – that government was the only lender in a market it shouldn’t be in at all.
I have a love/hate relationship with the finance fairy, Barney Frank – strictly platonic though.
The long standing Democratic Chairman of the House Banking Committee said this in 2003: “There is no guarantee. There's no explicit guarantee. There's no implicit guarantee. There's no wink-and-nod guarantee. Invest and you're on your own. Nobody who invests in them should come looking to me for a nickel. Nor anyone else in the federal government.
Barney wasn’t any more in denial than most others at that time but now he says this: "I think they should be abolished. The only question is what do you put in their place?"
Something in their place other than private banking? Nuttin’ honey.
The Housing Industrial Complex – realtors, home builders, mortgage bankers, et al – want more of the same and they will push hard.
Do our idiot legislators understand that government cannot be allowed to run anything? Does $130 billion dollars leave a mark? Do they have the balls to do the right thing? Will progressives walk the walk and block subsidizing big corporations? Remember, there is no benefit to home buyers. Will righties walk the walk and keep government small and out of markets?
Fannie and Freddie were a bipartisan supported source of ideological battle and partisan fund raising. These guys will do it again.
As I said, Congress has already nationalized tuition loans while private industry is offering “higher education” to high school dropouts with no jobs and no assets at $30,000 and more per year. Does no one see the parallel? How do you think this will end?
We should be watching closely and voting accordingly.
No comments:
Post a Comment