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The Rise and Fall of Fannie and Freddie

Posted on Jul 12, 2008
Fannie Mae

Although certain Washington denizens from both sides of the aisle might have been thrown when the two government-backed mortgage finance companies, Fannie Mae and Freddie Mac, hit the skids last week, several of their current and former colleagues had long seen the crisis coming.

The New York Times:

As the Bush administration scrambles to address the sudden decline of the country’s two largest mortgage finance companies, some of their longtime critics say the crisis has been building for years.

Among them is Jim Leach, a Republican former representative from Iowa, who began arguing two decades ago in Congress that the government-chartered mortgage companies, Fannie Mae and Freddie Mac, were unfairly insulated from the real world.

They were not subject to the same financial standards and tax burdens as their competitors, he warned, and if they ran into trouble, an implicit government guarantee to back them up meant taxpayers would be left with the losses.

“There are times in public policy making that one can feel like Don Quixote,” Mr. Leach said of his repeated legislative battles to rein in the two companies’ growth.

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By hippy pam, July 14, 2008 at 7:13 am Link to this comment

AND HOW MANY of the CEOs of these companies are DUES PAYING[i.e.bribe payers/takers]members of “THE BULLSH*T BUNCH”?As in…I’ll stroke yours if you stroke mine…

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By felicity, July 13, 2008 at 12:06 pm Link to this comment

Eric L. - speaking of Treasury Secretary Henry Paulson Jr.  A John Paulson, Paulson not a long list in the telephone book, former employee of Bear Stearns made $3 billion in ‘07 and early ‘08 by shorting subprime mortgages.  Dots to follow?  I’ve no idea.

That said, there’s really only one solution to ‘too big to fail’ and it is no entity should be allowed to get that big.  What happened to trust busting?

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By Eric L. Prentis, July 13, 2008 at 9:51 am Link to this comment
(Unregistered commenter)

Crony capitalism practiced by Treasury Secretary Paulson and Federal Reserve Chairman Bernanke has to end. The US taxpayers should not save Fannie Mae and Freddie Mac’s private equity holders, like the illegal $10 dollars per share bailout paid in the $29 billion dollar Bear Stearns debacle. President Bush’s “ownership society” should start at the top, the rich and the powerful have to stop being such hypocrites.

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By webbedouin, July 13, 2008 at 7:56 am Link to this comment

Currency backed by bonds
Bonds backed by currency

What is it that all fiat currencies through out the history of the world have in common??

They all have failed.

And even now, The WaPo can not see it coming…

Many people hang on to the dollar’s value as some kind of religious belief…

Every moment the dollar is worth less,
soon it will be completely worthless

Fannie & Freddie are just another nail in the coffin.

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By Expat, July 13, 2008 at 6:49 am Link to this comment

Economically, y’all are riding the roller coaster from hell and the safety bar is broken.  The betrayal is nearly complete.  Welcome to the wasteland!

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skulz fontaine's avatar

By skulz fontaine, July 13, 2008 at 5:58 am Link to this comment

That sickening ‘body hitting the floor’ sound emanating from Babylon-on-the-Potomac, is the great Amerikan economy. Propped up, shaded red, over-extended, lied about, and bankrupt. Without “sound fiscal policy” and government regulation nonexistent, the system has been under assault by the profiteers for quite some time. Bye bye Ms. American Pie, you’ve been driven to the levee and raped brutally by Bush and Company and they’ve tossed you out their door and fanny first in the mud. Get it? “Fanny first”! The Amerikan taxpayer will of course, be expected to bail out yet another fine mess that George ‘boy king’ Bush has gotten us all into. Oh yeah, and Congress. Congress does hold the purse strings. Yeah, that is the theory.

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By eggroll, July 13, 2008 at 3:22 am Link to this comment

Most macroeconomists that work with housing noted the shift into housing that took off after the collapse of the tech bubble. Housing, at least as far as the countries with longest mortgage records evidence (Denmark and the Netherlands), is an inflation-neutral investment. One feature of earlier housing construction was that people tried to build in the best locations. The latest building boom often involved poor or irrational locations far from jobs, requiring long commutes. Thus, the market-clearing that is talked about now is complicated by the fact that about half of America’s housing stock is wrongly-built in terms of energy intensity

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By anon, July 12, 2008 at 11:28 pm Link to this comment
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Fadel Abdallah, July 12 at 8:51 pm

Identifying and doing something are 2 very different things in this country right now. And our 2nd amendment right does not at all mean that everyone is armed to the teeth or even capable of doing anything even walking in protests, holding signs, singing and shouting.

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By Fadel Abdallah, July 12, 2008 at 9:51 pm Link to this comment

“In Washington, Fannie and Freddie’s sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years.”
People! If you want to identify your real enemies, just read the above paragraph from the original article, and give it a real thought!

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