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by jteamaz from Phoenix

Last Post 16 days, 18 hours Ago


Fannie Mae/Freddie Mac Bailout
Jul 16, 2008 | 12:48 PM
Category: Political
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This past weekend Treasury Secretary Henry Paulson, former head of Goldman Sachs investment house, gave us a perfect demonstration of what's being "Wall Street Socialism." We're being told that the Bush administration is seeking Congressional approval to bail out Fannie Mae and Freddie Mac. these institutions are government created but privately owned profit-making housing companies that hold almost 50% of the mortgage market, somewhere around $5 Trillion. With the housing market in turmoil, their shares have nosedived, and they have suffered billions in losses. Both could possibly be bankrupt if their assets were marked down to current market value. Now Bush wants to prop these guys up and even offer taxpayer money to recapitalize them if necessary. Here we go again, gambling with taxpayer money. Ben Bernanke, Federal Reserve Chairman told us yesterday that with this guarantee they are in "no danger of failing."

Curious how they've managed to avoid scandal and crisis? In the last 10 years Fannie Mae and Freddie Mac have spent nearly $200 Million on lobbying and campaign contributions. In what's called a sophisticated lobbying operation and scores of homeowner groups pressuring lawmakers, they have managed to stop increased regulation and calls for transparency in day to day operations. Their payrolls include power brokers such as Rick Davis, McCain's campaign manager, and VP vetter Jim Johnson from Obama's campaign. One can rest assured that these guys will be well represented, no matter who's in the White House, their political contacts are deep within both campaigns. McCain's fundraisers alone have netted $12.3 Million in fees over the last nine years. For the most part, they will be nationalized, being guaranteed by you and I, the taxpayer. Only exception; we won't be able to add their assets to the books, they will still be privately owned.

As these institutions grew and profited the executives pocked huge salaries and bonuses and gave them even more incentive to "cook the books." Last year the Chair of Freddie Mac took home a mere $18,289,575. Fannie Mae CEO Daniel Mudd received a paltry $13.4 million (a 7% percent increase) while the company lost $2.1 Billion and shares fell 33%.

CEO's will continue to pocket multi-millions in salaries and you and I will pay for their failures. They're now completely on our tab. One has to remember this comes on the heels of the Bear Stearns debacle involving JP Morgan Chase, also backed by the Fed. And let's not forget Indy Mac in California, a good ole' fashioned run on the bank, somewhat reminiscent of the Great Depression of the 30's, depositors have lost millions in savings.

All in all, these guys are playing with house money -- not exactly an incentive for prudence in any case.
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Member Comments Total Comments: 8
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toadie800 read my blog view my photos
Jul 17, 2008 | 7:26 PM

the market needs to do what the market is going to do. the government needs to quit bailing out these financial inst. all that is being done is pushing back the problem only to make it worst the next time.
Raysmom read my blog view my photos
Jul 19, 2008 | 10:16 AM

I understand the market needs to maintain some level of consumer confidence, but toadie has it right. While the rest of us peons take the hit of market adjustments, which I am willing to do, these CEO's are taking way too big a piece of the pie.

A good rule of thumb- you always get more of what you subsidize. Is this kind of financial mismanagement what we want more of?

And these people who are involved with Mae and Mac, heavily involved in the presidential campaign- seems like a breech of public trust to me, a true conflict of interest.

Interesting blog.
jteamaz read my blog
Jul 19, 2008 | 11:00 AM

Thanks Raysmom, but I find it interested how it's not grabbing much attention. This is a huge taxpayer boondoggle, and continue to let it happen. Very puzzling.......
toadie800 read my blog view my photos
Jul 19, 2008 | 12:57 PM

it is the misunderstanding of the workings. the blind following of political leanings has played into this boondoggle. Our economy is artificial because there is nothing to back it up. printing money for the sake of printing only increases inflation. then add in funny loans , this is what the taxpayer gets.
Raysmom read my blog view my photos
Jul 22, 2008 | 10:30 PM

I came back to see what people had said, and I'm disappointed, but maybe not surprised, to see that people don't much care about the whole redistribution of wealth lie and false positives when you subsidize failure with that stolen wealth, because gov't has gotten too big to even understand or have much control over. That's how we got in the habit of doing this kind of spending, and politicos with special interests now run the show.
toadie800 read my blog view my photos
Jul 22, 2008 | 10:41 PM

agreed, how ever we would not be on this road if for hoover.
thecommonstranger read my blog
Jul 23, 2008 | 3:07 AM

The money would be better spent paying back a percentage of the loans for home buyers, not giving large corporations donations. Use tax payer money to aid taxpayers! Not large corporations who's CEO's stand to gain more financially than most people will see in a lifetime. By paying back a percentage of the loans, Fred and Fann will see profits increased and home buyers will stand a chance to keep their investments during this recession.

Bailing out Freddie and Fannie isn't going to bring down the foreclosure rate. If anything, it will lead to more foreclosures as the economy slides further into recession. More home owners will borrow from their 401k's to make ends meet, decrease personal investments into their 401k's creating a decline in stock purchases and blah blah blah

Whateva'. What do I know? I'm stupid.

Didn't Nachio get a large increase while he personally managed to destroy the value of Quest stock? Why yes, he did :)
ryansmom81
Sep 24, 2008 | 11:04 AM

Some interesting facts about the Frannie/ Freddie bailout...makes you wonder-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=
aSKSoiNbnQY0
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jteamaz

Not much to say actually. Just a normal kinda guy. I drive a truck delivering groceries for a major food chain here in the valley. Try to keep educated on local and national events especially those concerning corruption and moral ineptitude by our "elected officials." Very much for protecting our freedoms and rights, always open to new ideas and discussions. I don't identify as Democrat or Republican, and don't like to be labeled as liberal or conservative. Just try to stay responsible and informed as possible.

Member Since: 4/18/2007


 

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