bastions of privilege, financed by the taxpayer Somebody needs to explain to me how an organization that buys and guarantees home mortgages is a "bastion of privilege." Between the two of them, Fannie Mae and Freddie Mac are involved in half of the mortgages in the country. Is this guy saying that owning a home in America is a privileged state that needs to be abolished? The quote doesn't sound like something that a former Fed bank president would say. It sounds more like what a doofus reporter would tell us he said. |
These two institutions have been “rewarding” ex-government officials / politicians with very cushy jobs and rich perks (stock options, bonuses, etc), mostly Democrats by the way.
Over the years, FNMA and FHLMC have contributed a ton of money to Democrats in Congress. Now, the last thing Congress wants is for that piggy bank to go away. Congress will do whatever they can to keep FNMA and FHLMC afloat, hoping that Obama will be elected and then Congress can pump money back into them.
Essentially, FNMA and FHLMC are enormously leveraged hedge funds that are financed at rates slightly higher than US Treasuries. They got in trouble for the same reason that banks, dealers, and hedge funds did...they chased higher yields in the wonderful world of subprime mortgages. If they would have stuck with their mission of guaranteeing prime conforming mortgages, they would not insolvent.