Why You Should be Worried About the Rescue of Fannie Mae and Freddie Mac

Two words Ron Paul!

excellent article !

President Bush said yesterday that "Wall Street got drunk" in explaining the current credit crunch. The MBA Cowboys who dreamed up the whole notion of Fannie Mae, Freddie MAC, and Sallie Mae have to answer for this mess. The CEO's for two of these companies left or were ready to leave with tens of millions in stock options, all paid on the backs of the borrowers and stockholders. The article implies that this mess was caused by the feds but the truth is that the mess was caused by a lack of regulation, nor too much regulation. Loans made with no income verification are just plain bad business and stupid. Common sense, basic financial management practices would have prevented this situation. Lastly, when I went to school, there was no such thing as an "off balance sheet" transaction. The AICPA should ban the whole concept of such a thing.

But Ms McDonald, what puts me near to having a stroke is a President who would appoint the CEO of an investment bank to Treasury Secretary of the US, and a student of Alan Greenspan,to head the Federal Reserve. Also Ms McDonald I find it more than just a coincidence that we have another 2 term Republican President, and another banking/financial scandal. I dont use that term loosely either.

I am also against the government stepping in on this Fannie, Freddie mess. Why should I and others who are responsible mortgage payers bail out the ones who sucked all the equity out of there homes, or bought a home out of their finacial means. We tax payers are the ones that will pay for this not the gov. . The government is totally out of control with spending. People need to wake up before they have total control of our lives.

Reagan--our hero--is the one who started the multi-trillion-dollar Debt Monster on its way. Thanks RR!

Dear Elizabeth McDonald...the article you wrote exposing Fannie Mae and Freddie Mac does concern me...but I am lost in the relationships between the billions and trillions of dollars and how the government is putting the screws to the people with their complex wheeling and dealing. IN SIMPLE EVERYDAY LANGUAGE (omitting the cutesy talk) please distill the facts to the point where it is clear to me and the readers just how the government is going to screw us to the financial wall and then rip us off. I am,(sad to say) unable to connect the dots and fight the system of connivers in our government.

So I can't say I totally get this (I took a macro econ class but that was a long time ago). Here's what I think you're saying to me: DEBTDEBTDEBTDEBTDEBTDEBTDEBTDEBTDEBT DEBTDEBTDEBTDEBTDEBTDEBTDEBT DEBTDEBTDEBTDEBTDEBT DEBTDEBTDEBTDEBT DEBTDEBT DEBT $

It's getting really serious if Fannie & Freddie have to be bailed out. It just tells me that the government doesn't have a clue whatsoever to save this moribund economy. I just cannot believe this is happening in the US with all the brightest minds and B-Schools still unable to figure out how to fix it. Either I am dreaming or it's a conspiracy. You guys tell me!

Maybe the Fed initiative to help Fannie Mae and Freddie Mac help our present economic situation with tax payer's money. Then what about the small businesses who are affected by this down turn. We have seen the Fed lowering the rate to the bank to 2%, but the bank is not responding to consumers needs for lower rate for those who are still qualified. If this economy lingers longer, maybe the people who are now qualified may not be later. The help to Fannie Mae and Freddie Mac would be good, but please extend those low rate access to consumers.

1972, my initial year as a residential real estate appraiser. Oh how simple, competent and professional mortgage lending was. Local, in house, prudent and personal. The only mortgage broker was SWD for FHA/VA. As the great Coach Vince Lombardi said " its a simple game...block, tackle and hold on to the football" Well that is what we need to go back to in mortgage lending. OWNER OCCUPIED, 25-28% rule, local lending via FDIC financial institutions, elimate mortgage broker/wholesaler... the basics always have and always will work for a healthy business environment. A home is a place for family, friends and fond memories. Not a cash machine for fly by nite mortgage brokers and Wall St. hedge funds. Our neighborhoods are being devestated and we need to revise mortgage lending which will heal or neighborhoods around the USA!

Maybe the Fed initiative to help Fannie Mae and Freddie Mac help our present economic situation with tax payer's money. Then what about the small businesses who are affected by this down turn. We have seen the Fed lowering the rate to the bank to 2%, but the bank is not responding to consumers needs for lower rate for those who are still qualified. If this economy lingers longer, maybe the people who are now qualified may not be later. CPI & unemployment is on the way up, the dollar is being devalued, and the Fed as it seems ignoring us consumer. The help to Fannie Mae and Freddie Mac would be good, but please extend those low rate access to consumers.

And Bush's resolve not to sign off on the "rescue" unless the CDBG handout to non-profits was removed, folded like a liar's loan.

The current Fed lost its independence by injecting its own money into the current crisis. Actually, it is not its own money; Fed injected the public money and put all of us at risk. In the past, Fed intervened market by changing policies and interest rates. Economy has its own way to cycle ups and downs. It is foolish to put so much money at risk to "prevent" economy to normally complete its cycles. Respect the nature is important; do not just think human is in complete control. The Fed current effort will not prevent a recession; and actually in contrary, it will make this recession deeper and longer. Mr. Paulson has its own personal interst. Remember he came from the Wall Street. The federal government and the Wall Street elites have an incentive of under-reporting inflation. In a slow economy, the portion of under-reported inflation will suddenly become part of the GDP growth (a virtually a name game). Also, by under-reporting inflation, federal government can avoid lots of payment on society security payment. So, keeping inflation high and not reporting it can really help corporations look good on balance sheet and help government of not paying what it should pay to genral public. Democracy has many benefits. But, like everything on the earth, democracy has its own drawbacks. One significant drawbacks of democracy is that elected officials have too short time span in making public policies—most public officials are only thinking about next term election and all the effort is devoted to quickly address the current problems if they can or delay them to the next terms; no one is willing to take the hit by make a public policy that require some sacrifice of the current generation but can benefit generations to come. CEOs of publicly traded companies are only thinking about profit of next quarter or next year. Who is supposed to think beyond 10-year or 20-year horizon? This is the fundamental problem of democracy. This drawback is not correctable through the cycle of democracy itself. Mr. Paulson is exactly doing this. He always by asking a small piece to track the other party in to the game. Later, when situation worsens, the other party finds it is not possible of not continuing to get involved. The "unlikely for US government to get involved" and "for the next 18 months only", and "total liability is $25B" are claims not way to adjust. Mr. Paulson can always come back to the table saying: "...after our last decision, situation has worsened and we need more help." It is silly to see those Wall Elite and top government officials use this phrase so often; making it like that they have nothing to do with it. Please remember, they should be held accountable if things getting worse when we go down the route they advocated for us. Look back to history, whether it is a Roam empire or dynasties in China, on average they lasted about 300-400 years: 100 years to grow; 100 years to enjoy prosperity; and 100 years to perish. I am not surprised that if US is already entered the declining phase. No matter how good a system is, just like no matter how healthy a person is, it will come to an end and another new cycle will begin. Fed should not act as financial "God". Fed and treasure secretary needs to look beyond the political horizon, for the benefit of the society and generations to come.

Imagine a mafia boss saying to you, "In this present crisis, the mafia is not the solution to your problem, mafia is the problem… It is no coincidence that your present troubles parallel and are proportionate to the intervention and intrusion in your life that result from unnecessary and excessive growth of the mafia. Now, here's what I'm prepared to do to keep you safe from the mafia..." That's how all extortion speeches start and Reagan started this whole extortion racket that the government has foisted on the tax payer. Notice how both the government budget and debt (essentially off budget government spending) exploded under Reagan. That's not fixing the problem. Deregulation was a farce. There was no reduction in regulation, it was simply re-written to favor corporate interests. Blaming the government for your problems is like blaming fire for burning down your house while ignoring the arsonist who started it.

Your article is right on point. My question is "Who will bail the taxpayers out? Welcome to the United Socialists of America. Ken Kesler

Send FEMA in to fix the two organizations. By the time the head hondos for the three F's get it together, it will be a 2012 campaign issue and one of the Clinton Bush talking points. Ronald Reagan signed both my college diploma and my CPA certificate, hence, similar thoughts, government fixes are fatally flawed.

I actually re-read MacDonalds articles usually. Missed this line: "The ‘60s were when all fiscal and monetary responsibility started to fly into a ditch, and when taxpayers were loaded into the backseat of Congress’s spaceship pointed directly at the center of the sun." Well put. I had to look up the word adumbrated though ! Thanks for the time on this article, sure that's what you're paid for - but I think Macdonald would still be bringing constructive criticism in attempts to better this world - or at least prevent it from getting worse ! Point here is, unless I'm missing something Ms. MacDonald, you really seem to be a part of your work, and seem to really snjoy it.

The thing that makes me the madest about this situation is so many people working for these companys made so much money off of the backs of the suckers who thought they could make money from the houses they bought. Why dont the people who were making the most money from this help us pay down some of these loans?? I sure wish I could run my buisness and be backed by the government. opps Im sorry I dont think I did that right can I please have a bunch of money someone else has to pay back for me!!!

You da man there girlfriend! Good job on distilling the angel's breath from the grog. I'm still choking on the slag math discharged from our blessed yet freely illiterate press and media outlets. If ye want to float bravo sierra past a really thick electorate, merely put some frosting upon that turd. Again, top job there mate, Keep kicking ass and taking names. James.

Why is it that some people can only think about government as "them?" This kind of thinking is avoidance of responsibility. Government is, or should be, about "us." If "we" do something wrong, we must accept responsibility rather than trying to pin it on some partisan scapegoat. In the case of the housing crisis, the behavior of the present administration can be seen as a large contributor. Accepting responsibility means removing these incompetent or criminal persons from office and learning from the mistake that put them there. We cannot help making mistakes, but we should insure these mistakes are not intentional.

I don't believe your assessment of the government's intentions are correct or complete. What could/will the government recover from bailing out Fannie/Freddie? Also, how will the affect the immediate and long-term economy? I think there is a lot more at stake here than just the monetary part of this housing bill. We are seeing that the government is controlling more and more of our market; with the drastic reduction in interest rates, the value of the dollar decreased, our markets became inflated, and we are looking at an economic collapse vs. Europe and developing nations. Our economy looked so great several years ago because we were able to work on the backs of these developing nations, but now as we are becoming economic equals, it is showing that the US is dragging behind in manufacturing, R&D, and plan old hard work. As far as the Fannie/Freddie bail out goes, I think it is a GOOD short-term solution to our economic problems, but an UNKNOWN long-term solution to our economic future. Even though we are lacking in a lot of areas, I believe the American economy can handle the added $200 billion debt that COULD be incurred by this buy-out. People want to keep their home, and this seems to be a solution that homeowners need. I'm not for big government, but I am for saving our "economic face" when it comes to our nations worth vs. any other nations. Our solution to all of our problems is the value of the dollar vs. the euro vs. the rest of the world's monetary value. If we can solve this problem, then our economy will rebound back to being the world lender, NOT borrower...

In addition to what your article points out, am I incorrect in believing that Fannie pays over 20 executives over $ 1,000,000.00 a year salaries and even more critical both Fannie and Freddie have not eliminated dividends to shareholders? Let the investors take their lumps just as the rest of us have taken our these past 12 months.

I have yet to be made to understand why these companies can't be allowed to fail. I understand why banks can't be allowed to fail their depositors would suffer and confidence in banks would suffer. Even Bear Stearns if allowed to fail, would have cause havoc in the markets where trades would be settled and some clients would loss money and once again cause a loss of confidence. But Fannie Mae and Freddie Mac are not banks or even investment banks, they have no depositors to protect. All the people hurt would be risk takers, shareholders or bondholders they are being paid to take a risk, they did and got burned. Let go up in flames, that is capitalism.

Your figurative spaceship to the Sun actually broke free of Earth's graivity under Ronald Reagan. His Laissez-faire policies and monetary pandering to big business and Republican supporters is the root cause of this Freddie/Fannie mess. Reagan and today's Republicans whine about Social Secuirty and Social Welfare but are perfectly content with Corporate Welfare. Reagan would argue for bailing out Freddie/Fannie and then try and explain why going forward they needed less regulation.