"Perverse, relentless, untouchable" -- Fannie and Freddie

As your Congress rushes to write a blank check for government aid to Fannie Mae and Freddie Mac, this caught my eye: Wall Street Journal columnist Paul Gigot's withering criticism of one of the meanest gangs in Washington, "The Fannie Mae Gang."

Highlights: After describing Fannie and Freddie as "perverse," "relentless," and "untouchable," Gigot writes, "Their unique clout derives from a combination of liberal ideology and private profit. Fannie has been able to purchase political immunity for decades by disguising its vast profit-making machine in the cloak of 'affordable housing.' To be more precise, Fan and Fred have been protected by an alliance of Capitol Hill and Wall Street, of Barney Frank and Angelo Mozilo."

More: "... about half of the implicit taxpayer subsidy for Fan and Fred is pocketed by shareholders and management. According to the Federal Reserve, the half that goes to homeowners adds up to a mere seven basis points on mortgages. In return for this, Fannie was able to pay no fewer than 21 of its executives more than $1 million in 2002, and in 2003 (Franklin) Raines pocketed more than $20 million. Fannie's left-wing defenders are underwriters of crony capitalism, not affordable housing."

My two cents: There is a phrase in wide circulation in America today that accurately describes the this kind of enterprise: Privatize the profits, socialize the losses.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: A.P.

Comments

[It All Happens on the Margin]

Paging Sheila, Sheila, please report to the Comments section of this thread. Thank you.

[TakeFive]

I hope that readers of this blog will do more impotently rant in the comments about this thievery.

Contact your congressman here:

www.senate.gov/general/contact_information/senators_cfm.cfm

and impotently rant to them.

George Bush too, since he’s going to sign this turd that is floating his way.

[anonymous]

I can't remember who blogged this a while ago, but they described Fannie and Freddie as the biggest terrorist threat against the American public. I could not agree more.

The system is broken and they are rewarding the criminals. Perfect.

[caliguy2699]

The article is very interesting and certainly worth a read. Gotta love the account of Mozillo and others berating the WSJ reporter, and oops...he was right all along. Of course they would never apologize or admit they were wrong.

Shady and disgusting. IMO the media in general has not done a good enough job of connecting the dots and holding more ppl accountable for the ridiculous bumbling "ideas" coming out of Washington these days that are transparently playing into the whole "privatize the profits, socialize the losses" mindset.

[Uncle Billy Loves Naomi Klein]

Can you imagine how much water it takes to keep up that lawn?

WIDD (we're in doo-doo)

[fatkid]

Here's another term many of us may know:

"News at 11"

Did people not realize this 1,2,5,10,20 years ago?

[Jeugenen]

FANNIE MAE AND FREDDI MAC SWINDLERS ESCAPE JUSTICE

It is notoriously suspect that the Subprime Lending and Stock Trading Scam on the American People was shrewdly pulled off by crooked lobbies working in collusion with the Bush, Reid, and Pelosi Government, who systematically allowed control to be taken away from the regulatory Office of Federal Housing Enterprise Oversight over the government buyers of "conforming" housing loans, Fannie Mae and Freddie Mac.

Criminal investigations leading to heavy fines, long prison sentences, and a full recovery of the assets stolen from the America People are imperative, to sustain honest government; rather that the proposed ruinous inflationary government bail-outs so desperately proposed by Podhoretz Neo-Con Bush.

[The Empire Never Ended]

The arrogance of these $$ freaks have crushed the dollar and put the O.S. economy in the toilet.

[the problemwithcaring]

Can you imagine how much water it takes to keep up that lawn?

Posted by: Uncle Billy Loves Naomi Klein

I dunno, but Fannie is located in the NW Tenleytown section of the District which gets plenty of rainfall. (And my apology if pointing this out is elitist liberal sympathizing, as my goal always is to aim for elistist, liberal douchebaggery.)

[OverIt]

A plague on both their houses...

[Laker]

Fannie and Freddie executives being paid $20Million??? Is that a joke or what? Either they are a private company with shareholders that can make AND lose money while paying the executives billion dollars in salary - fine with me.
OR let them be a government company and in that case gains and loses belong to everybody, executives make no more than $200,000, sure less than when US president is making.
What kind of POS BS is that? This bailout sticks for miles.
Why would the tax payers sign a blank check for???? for having artificially low rate loans so that housing will get inflated to the tunes of millions of dollars???
The tax payers are sponsoring the low interest rates, then they take on astronomic mortgages to buy houses, and with all the fees, executives are being paid millions of dollars. Share holders make money by investing, and when loans start to default instead of having all the earning saved during the good year to cover, tax payers are asked to foot the bill and save the share holders!

This is a shame. Problem is inflation was running at 8-10% during the last 10 years. There is no way that interest rate could be 5-6%. Interest rates should have been 10% just to cover. Government managed to hide true inflation using creative CPI figures and huge cash out refinances by people that enabled them to float for years.
So if you don't need to drive or need to eat, the CPI core inflation is not a problem for you.
I'll tell you who those people are, DEAD people. IF you are under ground dead, you don't need to drive, and no need to eat. All the rest of us are getting screwed.

The biggest joke of all, is the fact that Fannie was designed to make housing affordable....Today they are doing everything they can to make it least affordable as possible, by low rates and huge amounts to borrow.
You want affordable housing? Take interest rates back where they should be (at least 10%), by this give incentive for good people to SAVE money, then after couple of years, they would manage to buy with a nice down, a nice 3/2 2000 sf house in good place for $200,000. (same house that was sold during 2006 for $800,000)

[shockg]

Someone get laker a pacifire. Just another day in the life of a housing speculator.

[LA]

Last time I checked, Henry Paulson and Ben Bernanke were the biggest defenders of Fannie and Freddie, and President Bush is defending Paulson and Bernanke. Guess that makes them all Left-Wingers, according to Gigot.

So the extreme Right is now the extreme Left?

So confused...

[Laker]

shockg,
Do you think it is not right if i get pissed off when my tax dollars are going to keep undeserving speculators like you inside houses that actually belong to the banks?

I understand that this is a free country but when you as a specuvestor lose money, please don't ask others to hold the bag.

[Roger Ramjet]

People, screwing other people. What a beautiful world we live in. People, screwing other people. What a beautiful world we live in. Come on now, sing along! People, screwing other people. What a beautiful world we live in..................

[Uncle Billy Loves Naomi Klein]

Problem: Why apologize? You don't seem like a douchebag. Maybe elitist since we're all elitist now, but certainly not a douchebag.

LA: Nope, no more labels left. All masks are off. It's just the haves and the haven nots and those that have been had.

[Brazil property]

Hi

It is a great property.

[Emerging market property]

Hi

It is a great and nice post and I like it.

[South American property]

Hi

It is a really nice post and I like this post.

[sheila]

This is not confined to the housing sector. I work a lot in energy and environmental policy and it is horrifying to see the evisceration of bills that would chip away at Big Energy monopolies while saving the environment be gutted, defanged and mitigated into impotence.

A recent example is AB 1920, which would have ALLOWED us (because now apparently we derive our rights from the government, not the reverse) to oversize our home PV/microwind systems and be paid fairly for the excess renewable power we feed into the grid. It's a system that is enjoying enormous success (financial and environmental) in 40 nations already, yet "green" CA is still crushing private system sizes and forcing ratepayers to give utilities a "gift" of all excess power we generate.

Big Energy steps into the "discussions" of the bill and what do you know? Ratepayers are, once again, NOT allowed to build PV systems based on what we want, but rather only based on past usage. And "feed in tariff" rates are set by the CPUC, which recently announced that rates hovering around 9 cents a watt were good (see Germany at 63 cents for a comparison). for those unfamiliar, even if you do not use one watt of power, you cannot possibly pay off any sized system - even in the mojave - at the maximum rates set by the CPUC over 20 years.

So, once again, a good idea that might really benefit all ratepayers and taxpayers, AND the environment, is now reduced to lip service and we are back to being enslaved by Big Energy, whose idea for "renewable power" is to have ratepayers and taxpayers pay 100% of the cost for them to build enormous, harmful power plants and lengthy powerlines, on our land and on our dime, and even using our money to force people from their homes, while they privatize all the profits.

It's as though all right wingers have Stockholm Syndrome and cannot bear the idea of their captors competing on a level playing field, so they bolster the Robber Barons, even though they will get just as screwed as the liberals under Big Energy monopolies. I mean, does Chevron give a discount when you show a Republican Voter Registration card? Of course not, because they are exploiting you, too, you just can't admit it.

All this to say, in our current political system, what we want, and what is right is irrelevant, because lobbyists control our government. Freddie and Fannie are one of a million symptoms of this disease, and we taxpayers always pay the price.

[Shadow]

It's patently clear why Bush did a 180 on the housing bill: he needs to be able to run up more federal debt, in particular to pay for the Iraq Follies.

Sovereign wealth funds (meaning foreign governments) hold more than $1 trillion in Fannie and Freddie bonds. The biggest holder is China.

If the US gov't didn't prop up Fannie and Freddie, China would start dumping their Freddie/Fannie bonds on the open market at a discount, which would completely freeze the market for new US gov't debt.

Bush needs access to new credit like a crack addict needs crack.

[tew]

Frannie and Freddie along with the myriad of non-profits and NGOs like ACORN comprise a web of corruption built on deception.

[jb]

Dear Uncle Sam,

I am in a bit of a bind and need you to help me out. I lent a bunch of my money to folks to buy houses that had no way of paying it back. Now they don’t like their house so much cause its worth about half of what they paid for it. I also need some money cause I take an annual salary of 20 million and there seems to be no money to pay me or my wife Fannie who gets the same amount.

Thanks, I knew you would help me out cause I am gonna give a bunch more money to your political campaign.

Freddie