Posted on 09/08/2008 2:22:19 PM PDT by Rennes Templar
Alaska Gov. Sarah Palin stumbled this weekend when she commented on the federal takeover of mortgage giants Fannie Mae and Freddie Mac. The Huffington Post "helpfully" pointed out her mistake to anyone who missed it the first time around.
Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers." The companies, as McClatchy reported, "aren't taxpayer funded but operate as private companies.
The takeover may result in a taxpayer bailout during reorganization."
Economists and analysts pounced on the misstatement, saying it demonstrated a lack of understanding about one of the key economic issues likely to face the next administration.
"You would like to think that someone who is going to be vice president and conceivable president would know what Fannie and Freddie do," said Dean Baker, co-director of the Center for Economic and Policy Research. "These are huge institutions and they are absolutely central to our country's mortgage debt. To not have a clue what they do doesn't speak well for her, I'd say."
- snip-
Palin just got a bit ahead of the facts. Now that the federal government has taken over the companies, taxpayers will likely be on the hook now for maybe hundreds of billions of dollars. Perhanps she was just looking ahead.
(Excerpt) Read more at swamppolitics.com ...
Fannie and Freddie have always had the implied backing of the US government so they might as well be.
Bingo. She made no mistake here.
Next watch Saracuda dive into these yammering mollusks with a lecture on how to interpret the English language.
Technically, she’s right - Treasuries probably have higher yields because investors in Treasuries are aware of the overhang of agency debt out there that may suddenly be added to the Treasury’s balance sheet. The nationalization of Fannie and Freddie shows that they were right all along.
Wrong. She is indeed perfect in every way. Including on this issue, where she was, and is, absolutely right.
The federal governmant was always going to take the ultimate hit for the irresponsible risks that Fannie and Freddie exposed itself to. And that means the taxpayers. Everyone in Washington DC knew that.
“A liberal Chicago paper citing the Huffington Post who “helpfully” pointed out her take to anyone who missed it the first time around.”
Just a hint of what’s to come in the 2 months. Every word will be parsed.
Fannie Mae was founded as a government agency.
But they are taxpayer guaranteed- and taxpayers are having to bail them out, so yes, Palin was right.
Really not a misstatement.
They have realistically gotten expensive for the tax payers and they were when she made the statement.
Taxpayers were already on the hook at least a month or so ago
Fannie and Freddie have always stood on an “implicit” federal government guarantee. As the bailout shows, the taxpayers have always been on the hook for these grotesque creations, and everybody knows it. Sarah did not mess up.
Insert "well, duh!" here. And you had to be an utterly clueless leftie to think that Fannie and Freddie were actually "private" corporations. There was no way that the federal government was going to allow them to fail, even if this meant billions of dollars in a taxpayer bailout (which is now upon us).
Fannie and Freddie are considered GSE’s (Government Sponsored Enterprises) and as such have the “full faith” of the US government behind them. “Full Faith” meaning a bail out if need be.
It's not just today's bailout. The federal government had to revamp FHA to acquire the failed loans Fannie/Freddie wrote.
Folks, there are going to be gaffes. Get used to it. Just a fact of life.
The taxpayers ARE funding Fannie/Freddie. They have been since the Congress passed the “bailout” bill in July where SecTreas Paulson was giving his “bazooka” of $330 BILLION dollars.
That isn’t some magic fairy tale money. That’s TAXPAYER MONEY that the Congress voted to give Paulson to bail out the GSE’s.
$330 Billion here, another few hundred billion there (when, not if, the current Treasury plan fails to stop more foreclosures and mortgage defaults) and pretty soon, bailing out Fannie/Freddie is going to make the S&L bailout look like chump change.
Good find. But look at the link in the middle...http://ace.mu.nu/archives/272836.php.
Meanwhile, in a total non-gaffe Obama identifies one of those 57 states he’s been campaigning in: New Pennsylvania!
Ha!
What Are the Origins of Freddie Mac and Fannie Mae?
By Rob Alford
Mr. Alford is a student at the University of Washington and an HNN intern.
In recent months, the nation's two largest mortgage finance lenders have come under increasing scrutiny at the hands of Congress, the Justice Department and the Securities and Exchange Commission (SEC). The Federal National Mortgage Association, nicknamed Fannie Mae, and the Federal Home Mortgage Corporation, nicknamed Freddie Mac, have operated since 1968 as government sponsored enterprises (GSEs). This means that, although the two companies are privately owned and operated by shareholders, they are protected financially by the support of the Federal Government. These government protections include access to a line of credit through the U.S. Treasury, exemption from state and local income taxes and exemption from SEC oversight. A recent accounting scandal at Freddie Mac that resulted in the replacement of three of the company's top executives has led to mounting concerns over the privileged status these GSEs enjoy in the marketplace.
Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.
Initially, Fannie Mae operated like a national savings and loan, allowing local banks to charge low interest rates on mortgages for the benefit of the home buyer. This lead to the development of what is now known as the secondary mortgage market. Within the secondary mortgage market, companies such as Fannie Mae are able to borrow money from foreign investors at low interest rates because of the financial support that they receive from the U.S. Government. It is this ability to borrow at low rates that allows Fannie Mae to provide fixed interest rate mortgages with low down payments to home buyers. Fannie Mae makes a profit from the difference between the interest rates homeowners pay and foreign lenders charge.
For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market. GSEs such as Fannie Mae and Freddie Mae, with their combination of private enterprise and public backing have experienced a period of unprecedented financial growth over the past few decades. The current assets of these two companies combine for a total that is 45 percent greater than that of the nation's largest bank.
On the other hand, their combined debt is equal to 46 percent of the current national debt. It is this combination of rapid growth and over leveraging that has lead to the current concerns of Congress, the Justice Department and the SEC with regards to the financial practices of these GSEs.
Fannie Mae and Freddie Mac are the only two Fortune 500 companies that are not required to inform the public about any financial difficulties that they may be having. In the event that there was some sort of financial collapse within either of these companies, U.S. taxpayers could be held responsible for hundreds of billions of dollars in outstanding debts. A recent investigation by the Justice Department and the SEC into the accounting practices at Freddie Mac revealed accounting errors in the amount of 4.5 to 4.7 billion dollars and resulted in the termination of three of the company's top executives. Ongoing investigations by Congress, particular the House Finance Services subcommittee that oversees the activity of GSEs, will determine the future role of Fannie Mae and Freddie Mac and the secondary mortgage market that they dominate.
exactly. they don’t operate like private companies. This is what happens when you privatize the profits and socialize the risks.
Freddie/fannie was an key part of Bush’s “compassionate conservatism.” It’s another way for mccain to distance himself from Bush, along with spending and the value of the dollar.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.