Fannie, Freddie, And You

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Wall Street got a bump yesterday, after news over the weekend that the federal government is taking over Fannie Mae and Freddie Mac, the giant US mortgage companies. Both of them were judged too big to fail... their folding would create such havoc in the US economy, many argued, that they must be propped up with government support (aka: taxpayer money). So, what does this move mean for you? And what questions does it raise about the US economy? Adam Davidson, our econonaut, is back to explain.



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could someone please walk us through what would really happen if we did not nationalize Freddie and Fannie?

the news keep saying it would be a catastrophe. however, are they saying it would be bad for the wall street, et al?
why not let the hedge funds, banks, etc. fail? if all of those mansions and properties owned by the banks were put on the market then we might even out some of the financial disparity in the USA.

Sent by david | 2:14 PM | 9-9-2008

Annoying to me who bought within his means and pay my mortgage faithfully every month. Maybe I ought to have been one of those buyers who "didn't understand the terms of his loan," so the government could be bailing me out. Free market is a sham if idiots are bailed out.

Sent by Mike | 2:14 PM | 9-9-2008

What will happen to the stock of Freddie and Fannie

Sent by Aaron Lopez | 2:22 PM | 9-9-2008

I want to know what this will mean for fixed and adjustable rate mortgages?

Sent by Amy | 2:27 PM | 9-9-2008

So, if FNMA started in 1938, I understand how my immigrant family bought housing in the first place.
In fact, after being here 2 decades by 1938, my Italian great grandfather was able to buy two 3-flats eventually, housing his children after their marriages.
Basic need fulfilled for those married during the Depression Era.

Sent by Cynthia Gran, Chicago | 2:27 PM | 9-9-2008

if there were a global crash then all of the speculators, short-sellers, and wall street operators would then have to find work where they are actually creating value; not simply betting and manipulating on the markets. these people create nothing, pocket millions and then get bailed out.

Sent by ddd | 2:28 PM | 9-9-2008


Not too big to fail, but too big to bail

Sent by Spiv | 2:30 PM | 9-9-2008

Good program on FAnnie & Freddie.
Please also mention the Chrysler rescue and the consolidation of the NE railroads.
Also, what about the guarantees for insurance, ietc. for nuclear power.

Sent by Rhea Rehark-Griffith | 2:31 PM | 9-9-2008

Their existence is counter to their mission. Their Great Depression origins were meant to encourage home ownership to prevent blight. Lately, they've promoted inflation of home prices which lead America to perceived wealth effect... building a mass consumption society, widening the trade gap, creating a weak dollar. This inflation in prices makes the affordability gap widen, making their mission harder. In restructuring these companies, it should be considered that home ownership should be promoted in areas where home ownership percentages are low and not areas where home prices and ownership are already high.

Sent by Dan | 2:32 PM | 9-9-2008

What will make more upset is when weeks or months later there will be small reports about the huge golden parachutes and bonuses that have been paid to the respective heads of both of these organizations...

Sent by Scott Christensen | 2:34 PM | 9-9-2008

If we as a nation were a bit smarter, we
would enforce the anti-trust regulations and put in new regulations that would keep these companies from getting so big that if they fail they could take down the national or world economy.

Capitalism only works if it is very regulated.

Sent by Jim O'Donnell | 2:35 PM | 9-9-2008

hearing that 70% of home loans are now being purchased to fannie.freddie - which made me think. if originating entities (banks, mortgage companies et alia) pass off loans to securitization, fannie.freddie, what is different to prevent originators to still making bad loans

Sent by steven hubbard | 2:38 PM | 9-9-2008

A lot of the trouble in the mortgage industry can be traced back to deregulation in the secondary mortgage market that was pushed through by Senator (and McCain economic advisor) Phil Graham.

Sent by Jay Futterman | 2:57 PM | 9-9-2008

Fannie Mae / Freddie Mack
Let them fail. I don't buy it that it would cause any problems what so ever.

Sent by Jeff Martin | 3:09 PM | 9-9-2008

Do Freddie and Fanny have CEOs with a greed gene that greatly overrides their brains?

Sent by Alan Titchenal | 4:26 PM | 9-9-2008

If the U.S. Treasury, where there is nothing to treasure save some percieved powertripping and some shoddy dance moves, if the U.S. Treasury failed to tap the FED to create the fundage ($200B so far, more to come) to PROP-UP the superficial architects of the 2001-2007 housing bubble, FREDDY AND FANNIE, China would lose big-style. And we can't freaking let that happen!!!

Sent by E.. Blair | 5:12 PM | 9-9-2008

CEO's of both of those got tens of millions in severances. One got 13 or 14M the other got 9 or ten total chump change please people don't get distracted by that. Find out why NPR suck too bad to talk about any of iT!!

Sent by Slave Waged | 5:16 PM | 9-9-2008

Lets get back every fee, every bonus or other consideration that the loan originators and banks collected from people. Let's start with the high rollers. Maybe we could come together as a group, hire some lawyers, and get the 25 billion back.

Sent by Clifford | 5:18 PM | 9-9-2008

I love how Bush likes to blame this on the Democratic congress, even though it was Republican for most of his reign. Not to mention that the president is free to work to pass legislation too.

Sent by Alex | 4:29 AM | 9-10-2008

It's the tax payers who are going to foot the Bill. It is said that pain teaches best. Let them feel the pain of their greed and unsound lending practices. The Government needs to stop bailing companies out. Bail outs only encourage unsound economic practices. Why should I pay for someone Else's stupidity. Getting rich at the expense of others it wrong!!

Sent by Arwin | 9:45 AM | 9-10-2008

Just remember, everyone:

When a big corporation messes up and fails, helping them out with billions of taxpayer dollars is called SUPPORTING OUR ECONOMY.

But when private citizens lose everything they own to a mortgage crisis and rocky labor market, helping *them* out with millions of dollars of public money is called BLEEDING HEART SOCIALISM.

Remember the playbook!!

Sent by Kasreyn | 11:26 AM | 9-10-2008

The problem is if we bail them out, we pay. If we don't bail them out house prices continue to fall and the main asset most people have, their houses are worth less. We pay in lost house value. We need to agressively prosecute the people responsible. And the Fed chairman should be told to get out of town.

Sent by Clifford | 12:23 PM | 9-12-2008

Thank you, Mr. Davidson

Mark Kirchmeier

Sent by Mark Kirchmeier | 2:01 AM | 9-13-2008

I used to work in the mortgage industry in the 70's when there was such a thing as underwriting (Debt to Loan Ratios, Income Percentiles...). If the banks and real estate conglomerates hadn't come up with all of these bogus programs, none of this would have happened. There would have been absolutely NO WAY someone making $30,000 a year with $50,000 in debt already would EVER have qualified for a $600,000 mortgage if these loans had ever been underwritten. I have a friend who is currently working in the mortgage industry who said that that type of scenario occured on a DAILY BASIS!

I personally am getting tired of bailing out stupid people who didn't read the fine print and greedy executives who KNEW this was a failing proposition and yet walked away with massive amounts of money. We the taxpayers and the poor stockholders got left holding the bag. I was always told you were rewarded for success, not failure. Why is no one being held responsible for this debacle?

Sent by Robert | 12:11 PM | 9-18-2008

Just a quick PS. McCain was the person who was so anti-regulation and has been for most of his 26 years in the senate. Do you really think he is going to change his attitudeonce he is elected?

If you elect the McPalin ticket, this will be just the tip of the iceberg.
Remeber the Titanic?

Sent by Robert | 12:27 PM | 9-18-2008

According to the Center for Responsive Politics, Obama was the second largest recipient of money from Freddie Mac and Fannie May right after Chris Dodd, another Democrat, and chairman of the Senate banking committee.
The Clinton administration's White House Budget Director Franklin Raines ran Fannie and collected $50 million. Jamie Gorelick -- Clinton Justice Department official -- worked for Fannie and took home $26 million. Big Democrat Jim Johnson, recently on Obama's VP search committee, has hauled in millions from his Fannie Mae CEO job.
And this whole sub-prime mess got started with Andrew Cuomo's program of moving section eight housing people into a home of their own. It may have been a noble undertaking but human nature being what it is, sometimes people live in section 8 housing for a reason, they are not, for whatever reason, able to carry out the responsibilities of home ownership.
McCain warned back in 2005 that these two organizations FM & FM required investigation but no one would help him.

Sent by Clifford | 10:56 PM | 9-19-2008

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