Should We Fire Fannie and Freddie?

Obama wants to tax the banks that received taxpayer dollars, even if they’ve paid it back. This plan is cheered by many as the latest round of bonuses are handed out to the bank executives. Why is it that no one complains about the taxpayer dollars wasted on Fannie Mae and Freddie Mac and the bonuses given to those executives. Actually, why don’t we just get rid of Fannie and Freddie? By the way, Fannie Mae is not a candy store.

There is plenty of blame to go around for the recent economic bust, but make no mistake about it, Fannie and Freddie are at the top of the list. They had more to do with creating the housing “bubble” than any other party. It’s time for an accounting.

Fannie and Freddie are the only Fortune 500 companies that are not required to inform the public about any financial difficulties. They have tax and regulatory privileges that other companies do not get. They give their executives exorbitant bonuses just like the banks. Unlike the private sector, if they get in trouble taxpayers bail them out. Pretty sweet deal, huh!

Fannie Mae was created by the government in 1938 to help people buy homes during the depression. It continued after the depression to provide mortgages to people who needed help. As with all government programs, it exploded in spending. Due to a lack of funding, it went public in 1968 (making it a GSE – Government Sponsored Enterprise) to get even more money. In 1970 Freddie was created by Nixon to provide competition for Fannie. I won’t even comment on that. They do the same thing. They don’t give mortgages directly to people, they buy loans from lending institutions. This takes the debt off the banks books enabling them to loan even more money.

For years Fannie and Freddie have been lowering the lending requirements. Democrats (mainly) were pushing for more home loans to be given to lower income people. As their obligations got riskier and riskier the most idiotic move came in 2006. That’s when “proof of income” was no longer necessary to get a loan. As more and more people were unable to make their house payments, the crash became inevitable. We have not recovered yet. There were more foreclosures last year than ever.

Our genius economic leaders have suggested we start a third bank. All the bad assets could be given to that loser bank and then Fannie and Freddie can get back to business as usual. What? Are they that dumb or do they  just believe we are?

I believe it is time to fire Fannie and Freddie. Since they own half the mortgages in this country it will have to be done slowly.

Here is my one bit of crazy advice of us Americans – if we are unable to pay back a debt then don’t borrow!

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