Replies

there are times "when you need government to help spur private enterprise and economic development."

I guess I wouldnt mind hearing a few examples of when thats true, but in the context of what Newtie said I can't imagine how Freddie Mac and Fannie Mae would apply . In fact, it seems plain ridiculous to suggest as much. Freddie Mac has also added huge inefficiencies to the market even when it wasn't in default as it is now.

One example that Newt mentions, is the a tax mortgage deduction that encouraged people to buy homes. This has stimulated the economy for many years. And the FM's worked well for years also, until the Democrats appointed to run them stole every penny they could.

IMO, however, the government should stay out of home loans, and college loads. etc.

” but in the context of what Newtie said I can’t imagine how Freddie Mac and Fannie Mae would apply “

Actually Fannie is a good example of government spurring the private sector. Before 1934 you couldn’t get a twenty or thirty year mortgage. Mortgages typically ran for three years, at which point you had to roll the principal over into a new mortgage.

This became a big problem during the Depression when a full one third of American banks failed. It became very hard to find a lender to roll over your mortgage. Homeowners who were employed and who had never missed a payment lost their homes simply because they couldn’t renew their mortgage.

Fannie Mae was formed to create a secondary market in mortgage paper. Fannie would buy mortgages from banks and S&Ls, freeing up the banks’ capital so that they could make new mortgages. Fannie packaged bundles of mortgages and sold them to investors looking for a predictable cash flow, principally insurance companies and retirement accounts. Investors of this sort were looking for long term cash flow and as a result were willing to fund long term mortgages.

Prior to 1934 there wasn’t a secondary market in mortgage paper. The formation of Fannie Mae created one and it is now a huge industry. It worked without much of a hitch for decades when Fannie and Freddie dealt in stodgy conforming loan paper.

Roads, post office, central banks, Louisiana Purchase .... all promoted during the first 30 years after the Constitution. And if you think the United States Military is just there to protect you from being enslaved and but secure your entitlement to private property and gain, you are do not know your history.
Any organization can be corrupted, even Fannie Mae and Freddie Mac when it is turned into a vehicle for redistribution of wealth, read Red Lining.