Fannie Mae & Freddie Mac: An Unholy Brew
Even I was confused on this one. Talk about intricate conniving on a grand scale.
The federal government itself took over Fannie Mae & Freddie Mac directly, probably so the Fed would not get its hands dirty. The corruption and incompetence of the officers of these two mortgage companies should make them follow the Enron boys to prison; but it will never happen. The worst possible outcome for them might be that their “golden parachutes” (separation payments) may be deflated.
How can this be? It is simple: friends in high places, and money. Why do you think Senators Obama & McCain don’t want to discuss this hot topic? Remember if you are not part of the solution, you part of the problem.
The main big friend is Congressman Barney Frank: “Fannie Mae’s Patron Saint, WSJ 9/9/08. He his almost single handedly stopped any regulation of these yahoos since 2000. Why? Maybe it’s this: “But the biggest payoff for Mr. Frank is the "affordable housing" trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits -- as much as $500 million a year each -- to a fund that politicians can then disburse to their favorite special interests.”
Don’t think Rep. Frank is the only one to blame. A whole bunch of the senate, congress, bureaucrats, and even Cabinet level types are involved. And if you Bush haters what to sound off on this one, go ahead. He has stated over and over that this is the wrong approach, but agreed to it anyway.
Take a look at these three points:
1. The government’s main point man is Treasury Sec. Paulson. Where do presidents usually get their people for this job: in the financial arena of course. Democrat and Republican Presidents both do it. It’s not a party thing. If you think about it, it’s like asking the fox to guard the eggs in the henhouse. Good bye eggs!
2. The companies involved, though semi-half heartedly regulated by the government, are all financial community members. They can run things pretty much as the wish and they did.
3. Since the government has no money of their own, they have two places to get it: steal more from us directly (this is usually unpalatable) or borrow it. The lender is almost always the Federal Reserve System because no one in their right mind would lend them a cent. The Fed (a private company composed of banks; i.e. the financial sector) will create some and lend it, at a reasonable rate, to the government.
Are you getting the picture here? At all points of this unholy triumvirate are all of the same people. They swirl their magic swizzle sticks in this devils brew and out pops several things: a massive debt we have to pay, an addition to our national debt the size of 5 Iraqi wars, a kick in the butt for more inflation (especially since they promise to lower the Fed Rate instead of raise it), and a huge payout to their friends.
They make a big deal out of stating the stockholders would lose their interest first. When all of the former loans come due, that won’t be a drop in the bucket.
Sure their going to let Lehman Bros. crap out, there’s not as much money to be made there, and they can’t scam us on everything. We might get wise. There’s a fat chance of that.
Oh, look out there on the horizon. What is it? Nothing really, just the major airlines and all three auto companies (GM, Ford, & Chrysler) wanting their bail-out too.
Maybe we should just bend over and kiss our ------ good-bye.
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