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Fannie Mae, Freddie Mac

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Fannie Mae, Freddie Mac

Stop the gusher of taxpayer money going into the mortgage business.

Members: 3
Latest Activity: May 14, 2011

What Fannie Mae and Freddie Mac are doing to you as a taxpayer

Fannie Mae and Freddie Mac do not make loans directly to home buyers. They buy loans from banks and sell them to investors as securities. In the first quarter of 2010, together with the Federal Housing Administration, Fannie and Freddie (actually you the taxpayer) guaranteed 96.5% of all new home loans.

Fannie Mae and Freddie Mac are government-sponsored corporations that own or guarantee more than one half of the nation’s $11 trillion in mortgages. They have issued $1.6 trillion in corporate debt. All of this is outside the federal government budget and off its balance sheet.

With the implicit guarantee of backing by the federal government, Fan and Fred are able to borrow money at lower rates than their private competitors in the secondary mortgage market, crush their private competitors, and achieve a dominant market share.

So far taxpayers have paid $145.9 billion to bail out Fan and Fred, the largest bailout of all. The Congressional Budget Office estimates they will cost taxpayers $290 billion in 2010, almost $1,000 for every man, woman and child in the U.S.

On Christmas Eve (!), December 24, 2009, the Obama administration announced it would provide unlimited funds to cover any losses of Fannie Mae and Freddie Mac through 2012, the rest of President Obama’s first term.

This “allows the government to exceed the [previous] $400 billion cap on emergency aid without seeking permission from … Congress.” (Washington Post, A01, December 25, 2009)

Rep. Scott Garrett (R-NJ) called the unlimited guarantee “a continued bailout of failed entities that need to be privatized to protect the taxpayer.”

"Republicans ... introduced a measure during the financial-overhaul debate [May 2010] that detailed how to wind down the companies, but the amendment ... was defeated." (Wall Street Journal, p. A2, May 24, 2010)

Fannie Mae and Freddie Mac were major causes of the housing bubble and the current recession. They made “mortgage investments … to less-than-worthy borrowers.” Their risky “Alt-A” loans to borrowers with little documentation of income or assets accounted for 9% of Fannie’s loan guarantees and nearly 40% of its credit losses in the fourth quarter of 2009.

The former head of the federal regulator of the two companies testified to a Congressional panel in April 2010 that the collapse of the companies reflected a “deeply rooted … culture of arrogance and greed.” (Wall Street Journal, April 10, 2010)

Franklin Raines, an Obama financial advisor, received $90 million in bonuses while running Fannie Mae.

Henry M. Paulson, Jr. writes that President George W. Bush “had a deep disdain for entities like Fannie and Freddie, which he saw as part of a permanent Washington elite … with former government officials and lobbyists cycling through their ranks endlessly while the companies minted money, thanks, in effect to a federal entitlement.”

Senator Chris Dodd (D-CT), chair of the Senate Finance Committee which oversees Fannie and Freddie, received more campaign contributions from the two organizations than any other lawmaker, according to the Center for Responsive Politics.

The Obama administration has refused to account for the Fan and Fred debt it has guaranteed in the official federal budget. (See "Fiscal responsibility")

Rep. Scott Garrett (R-NJ) has sponsored the Accurate Accounting of Fannie Mae and Freddie Mac Act “to require that taxpayers receive an honest accounting of their exposure to the failed housing behemoths.” (Wall Street Journal, A18, February 23, 2010).

The same investment policies that led to the housing bubble and crash continue in effect at Fan and Fred. The government should get out of the mortgage business.

Newt Gingrich, in his book To Save America, p 151, puts it this way:
"Fannie Mae and Freddie Mac ... need to be replaced with smaller, private companies operating without government guarantees, whose leaders focus on making a profit, not manipulating politicians."

Discussion Forum

H.R.1182 and S.693 would stop taxpayer bailout of Fannie Mae and Freddie Mac 2 Replies

The GSE Bailout Elimination and Taxpayer Protection Act, introduced in both the House (H.R. 1182) and in the Senate (S.693) on March 17, 2011, would stop taxpayer bailouts of Fannie Mae and Freddie…Continue

Tags: mortgage, finance, freddie, fannie, housing

Started by Daniel Dyer. Last reply by Christopher Mullaney May 14, 2011.

The government hides our taxpayer debt for Fannie and Freddie off its balance sheet

In 1968 President Lyndon Johnson moved Fannie Mae off the government's balance sheet to help balance the budget for the Vietnam War and the Great Society.Secretary Geithner testified to the House…Continue

Started by Daniel Dyer May 18, 2010.

Why Fannie and Freddie are out of control

Some background on how Congress allows the two government sponsored enterprises (GSEs) to run totally out of control is instructive.“In July 2005, the Senate Banking Committee, controlled by the…Continue

Tags: GSE, mac, freddie, mae, fannie

Started by Daniel Dyer Apr 21, 2010.

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Comment by Lawrence on May 12, 2011 at 10:46pm
These agencies are for the big players in real estate. America does not need these criminal agency run by government for a select few.FRAUD AND ABUSE.
Comment by Lawrence on April 10, 2011 at 6:19pm
Dodd and Frank are the main reason for our housing failures. They are the ones that pressured the banks to lend without money down or ability to repay loan. Then the banks sold them to our friendly freddie& fannie. Dodd received sweet heart deal and lied about under oath. Democratic controlled congress would not prosecute him.The same with Frank,he cheated on his taxes and was slapped on hand. Both should be jailed.The USA used to be respected,now we are laughing stock of world. These two financial institutions should be closed NOW. Everyday they operate it cost us millions in losses.
Comment by Christopher Mullaney on May 10, 2010 at 10:45pm
Senator Chris Dodd and Representative Barny Franks are the two most out spoken and powerful supports of Fannie and Freddie. They through their actions in Congress are the quintessential reasons for the failure of those companies as well as the financial markets which feed on them. These two congressmen must go. Senator Dodd is leaving. I wonder if the voters in Massachusetts will have the courage to send Representative Franks home.
They say that these two quasi government companies are desperately needed to spur the housing market.
We all know better. The housing market is spurred by the ‘laws of supply and demand’. And no government has ever been able to contravene these laws.
Fannie and Freddie will cost the tax payers about $145 billion, becoming one of the costliest government boondoggles in decades. Freddie recently reported a net loss of $6.7 billion in the first quarter of 2010 and indicated it needs an additional $10.6 billion in assistance from taxpayers. Fannie's earnings report showed that the company continues to lose money on the trillions of dollars in loans it owns or insures.
The failure of these two quasi government companies and the price we tax payers are having to shoulder should show all voters that government involvement in our capitalist system usually results in kayos. Fannie and Freddie must be fazed out, and quickly.
Our Congressional representatives must be held accountable to the voters.
 

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