The bad news about this just gets worse and worse. The US government seized Freddie Mac and Fannie Mae yesterday.
This from Michelle's website:
|Clothed in politically correct fashions (”Catch the dream,” beckons Freddie Mac’s program to boost minority home ownership; a “leader in diversity,” brags a Fannie Mae press release), these public-private hybrids are two dangerous pigs feeding at the federal trough. Congress created Fannie Mae (nickname for the Federal National Mortgage Association) in 1938 to bolster home ownership during the Depression. Three decades later, it was partially privatized, but retained a host of government benefits. In 1970, Congress spawned Freddie Mac (nickname for the Federal Home Mortgage Corp.) to provide a lending competitor to Fannie Mae. Both entities expand the pool of money for home purchasers by snapping up loans that lenders make to homebuyers, and then converting those loans into relatively safe mortgage-backed securities that are attractive to investors.So, what’s wrong with this picture?As Fred Smith, president of the Washington, D.C-based Competitive Enterprise Institute, has noted, these financial beasts are a textbook example of “profit-side capitalism and loss-side socialism.” When things go right for Freddie Mac and Fannie Mae, they keep the profits. But when things go wrong, taxpayers — not just private shareholders, managers, and employees — will be on the hook.Freddie Mac and Fannie Mae each receive $2.25 billion lines of credit with the U.S. Treasury. These special pipelines give the institutions an implied federal guarantee available to no other private sector competitors in the mortgage market. That protection makes them immune to the costs normally associated with riskier and riskier behavior. Moreover, Fannie Mae and Freddie Mac are not required to pay state and local income taxes. In addition, the standard for how much money the government requires them to keep on hand in case homebuyers default on their mortgages is lower for Freddie Mac and Fannie Mae than for fully private banks and thrifts. The two corporations receive an estimated $10 billion a year in hidden taxpayer subsidies.|
Although these GSE's have no expressed guarantee - there is an "implicit" one. And now that they're adding the $5 trillion to our balance sheet, you're damn right it is guaranteed by you and me.
Who would do this to us? Who would by-pass the voting booth and decide, arbitrarily, to drag us into some financial morass?
Who chairs the Housing Committee? None other than Barney Frank (D-Mass). Who pushed Freddie and Fannie to be "backed" by government (ie. YOUR) financial securities?
The Democrats, of course.
The House passed the Mortgage Bailout bill back in July - thanks to 5th Column Commanders Pelosia, Frank, Rangel and Maxine Waters.
So now billions are going to be poured into these failing entities. They're throwing good money after bad money.