Sarah Palin fumbles on Fannie, Freddie

Chicago tribune ^ | Sept. 8 08 | Frank James

[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.

[afortiori]

Correct. Let's see if Obama and Biden, not their proxies in the media, are willing to argue the opposite.

[ought-six]

She is actually correct. Fannie Mae and Freddie Mac are government-created, mortgage-guarantee operations. They buy up mortgages from established lenders and sell them them as securities to investors, the transaction being backed by the federal government (i.e., the taxpayer). Thus, when a homeowner defaults on the loan the federal government eventually ends up paying off the debt.

[mywholebodyisaweapon]

You’re right, nmh, McCain and Palin should point out that the democrats pushed for low credit standards under the Bent One so that they properly shoulder the blame now that it’s hit the fan.
But in another sense, she’s perfectly right in her statement. Remember during the S&L scandal, the postponed bailout was eventually done ostensibly to staunch the bleeding by a thousand cuts that the failing thrifts were imposing on the treasury one-by-one.
I’m not sure I agree about either bailout, having been in the S&L mess at Ground Zero, but she’s just really restating the conventional wisdom that’s been swirling about. I guess it’s OK for Erin Burnett to say, but not Sarah Palin.

[secret garden]

Exactly. I wish people would read the story and know what it’s about before posting but some of us like to live dangerously and post first. ;)

[nikos1121]

aren’t taxpayer funded but operate as private companies.

they’ll be tax payer funded now..

[afortiori]

Let's see if Obama and Biden, not their proxies in the media, are willing to argue they have been a good deal for the taxpayer.

Crickets?

[Jim Robinson]

They are too expensive for the taxpayers.

[Mr. Silverback]

I was more disapointed by Gov. Palin’s understanding of the “Pledge of Allegiance” than I am her understanding of Fannie & Freddie.

Yes, indeed, we definitely want to throw her overboard for getting the date the pledge was written wrong (if she did indeed do so) and have Mr. I Put My Hands Over My Crotch During The National Anthem take the wheel.

Why don't you post about this some more, and maybe you can peg everybody's don't-give-a-crap meter.

[stylin_geek]

Excellent and succinct description.

I knew what Fannie and Freddie were, but didn’t quite know how to put it.

Anyway, I knew that Governor Palin was right on the mark with her remark.

Well, at least the media water carriers are looking at serious issues rather than her family.

I’m waiting for them to start jumping all over Senator Obama gaffes, now.

I know, I know, I’ll be waiting a long time.

[VeniVidiVici]

For all the BS by the Left that Fannie Mae was private, they sure were overrun by government influence. Sort of like another organization called the United States Post Office.

==========

From Fannie Mae's website:

In 1992, major legislation was enacted to modernize the regulatory framework applicable to the corporation. Regulatory responsibility was given to a newly created Office of Federal Housing Enterprise Oversight (OFHEO) within the Department of Housing and Urban Development (HUD). The new law included modernized capital standards and new affordable housing goals for Fannie Mae.

[kesg]

In 1968, to remove the activity of Fannie Mae from the annual balance sheet of the federal budget, it was converted into a private corporation.

I don't know of any genuinely private corporations where we taxpayers must subsidize billions of dollars in losses. It is "private" only in the sense that despite being on the hook for losses, we don't get to share in any profits as well. If that doesn't seem right to you, get in line.

The plain truth is that Fannie and Freddie were quasi-public corporations. Over the weekend, the government formally removed the "quasi" part. That is a welcome first step, but only if at the end of the day, after we fix this mess at great cost to the US taxpayer, we don't repeat the mistakes that led to this mess in the first place.

[TaxRelief]

It was clear on Friday that the government would be moving in on Fannie and Freddie. I presume she was reacting to the pending cost to taxpayers.

[Petronski]

She didn’t get it wrong. They got so big they cost taxpayers $200bn.

McClatchy and the rest can go pound sand.

[Brilliant]

The government had already insured more than a trillion dollars worth of loans purchased by FNMA and FHMC. I would not call that a purely private enterprise.

[VeniVidiVici]

And don’t miss this thread - http://www.freerepublic.com/focus/f-bloggers/2077631/posts

[Rennes Templar]

Thanks for that article. Clears up the murky status of Fannie.

[Wild Irish Rogue]

Most Americans probably think Freddie Mac is a new offering at McDonald’s.

It doesn’t hurt Palin.
What hurts Obama is saying he’s a Muslim and giving a shout out to the Nitaly Lions.
Among his many, many ,many gaffes.

[Jim Robinson]

Yup. Just another big government socialist boondoggle. Can’t believe there are “conservatives” who are willing to go along with even more of this big government crap. Learned a long time ago that there’s no such thing as a free lunch.

[colorado tanker]

It's the drive-by's who don't know what they're talking about.

Treasury recently issued what was effectively a guarantee not to let Fan and Fred fail and by last week it was universally assumed the Treasury would have to make good on that and bail them out, which actually happened over the weekend. It's the snooty lefties who are ignorant of the facts.

[Chaguito]

Look, the risk posed by GSE's to the taxpayers has long been recognized, e.g. http://www.springerlink.com/content/k3734n074g780x16/. I have no idea whether Gov Palin believes the taxpayers are funding Fannie. Had she used one word "risky" instead of "expensive," this would be a moot discussion. This is just payback for the type of "gotcha" blogging that pounces on slips and poor choices of words.

She can defuse this by simply 'fessing up a poor choice of words. It's going to be a long two months.