Fannie Mae, Freddi Mac

Two names all over the news, Fannie Mae and Freddie Mac.  We are about to be put on the hook for billions of dollars to keep them afloat.

This is necessary to keep the economy from failing, we are told.

I am sure it has nothing to do with the tens of millions of dollars Fannie and Freddie spent lobbying the politicians who are bailing them out.

Fannie and Freddie are what is called GSEs, for “Government Sponsored Enterprise.”

As we are seeing, it is good to be a government sponsored enterprise.

You can buy stock in them, they are publicly traded, privately owned.  But they get breaks from the government, including the cost of borrowing money to run their operations.

They they turn around and use some 170 million dollars to lobby that same government.

Wouldn’t you love to be a GSE?

Like many government projects, the theory is to help those with less money, so they can buy a house, part of the Great American Dream.

Fannie Mae employees and stockholders benefit from the bailout, and the average taxpayer foots the bill.

The idea is they were needed to help the mortgage  market make more funds available for home loans.  Since 1968, helping over 55 million Americans buy homes, the Fannie web site boasts.

The site leaves out some of Fannie’s past achievements, like the 400 million dollar fine for cooking the books.

Would 55 million Americans not have homes without Fannie Mae?

What if Fannie Mae only allowed 2 million Americans, who could not afford homes, buy homes?  That they are now losing in foreclosure?  Has that been a good thing?

It would be nice if Congress explored those questions, but, they have been bought off already.

The mortgage market would be in less of a mess absent government intervention.  Instead of throwing more money into failed ideas, the government should be getting out of the mortgage business.

Related posts:

1. Origins of the Fannie Mae/Freddie Mac Crisis
2. Fannie and Freddie Can’t Afford To Bail Out Subprime
3. Fannie Mae Bailout