Looking back at the first news from last year's federal takeover of Fannie Mae and Freddie Mac, you can see people searching for someone to blame for the collapse. A year ago today, one Planet Money commenter, Maria Schneider, wrote in to say:
We shareholders will be wiped out with this takeover of Fannie and Freddie. I thought our legal system was a warranty and would prevent the government from stealing from the people. We would expect the nationalization of Fannie and Freddie to be dictated by dictatorial governments such as Cuba or Venezuela. Or is this government a national socialist one?
They are stealing from the rightful shareholders of the company. We trusted the government and their cronies. I am sure their profits will soar with this measure. This is a legal system that protects the little guy, it was anyway until this government came into office. And one thought they were conservative republicans... [This] is an act of thievery.
Which prompted a dose of very strong medicine from Adam Davidson. On this anniversary week, I'll print in full his reply from the first days of the Planet Money blog.
Maria, as a shareholder in Fannie and Freddie, I can only imagine how awful a day this is for you. Indeed, you trusted that these quasi-governmental agencies were being well run and that they are safe. Over the last few months, you've seen the value of your shares collapse. Today, the nail was hammered in the coffin.
I will speak some harsh truths to you, though. . . .
I don't think it's fair to call this weekend's move "stealing." The stock price of Fannie Mae and Freddie Mac fell so precipitously because, well, they were very poorly run companies. They took on far more risk than they could properly handle. Legally you, as a partial owner of the companies, are responsible for that leadership. You -- I mean, now, the collective you of Fannie/Freddie stock holders -- did not throw out the heads of the company or demand more prudent actions.
Why didn't you? Well, I think it's because these were very successful, very profitable companies. They were successful specifically because, unlike almost any other private company in the U.S., Fannie and Freddie were able to use the implied backing of the U.S. government to borrow money at the world's cheapest rates.
Who stole your money? Well, in a sense, you did. You accepted (knowingly or not) high-risk behavior to get higher returns. As it happens, that high-risk behavior put the entire global financial system at risk of collapse.
I think almost any impartial observer would agree: the shareholders of Fannie and Freddie deserve no help from the U.S. government. It is an appropriate outcome that they lose most or all of their money. No matter how personally painful that might be to some.