“Spare some change, please? Forget that. Hand over another $8.4 billion to “Fannie Mae and sister company Freddie Mac.” “The Obama administration,” reports “My Way,” had “pledged to cover unlimited losses through 2012 for Freddie and Fannie, lifting an earlier cap of $400 billion.”
This via Jeff Tucker, in case you forgot who and what contributed to this affirmative-action driven downturn, here’s a New York Times’ story from 1999:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans….
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.
Back in 2008, some analysts had quipped that only North Korea and Cuba were more socialist than the US in the wake of the Fannie and Freddie bailouts. This space has regularly excoriated Republican hacks for referring deceptively to our cherished “American freedoms.” (Also see BAB’s “Fascism Rising” series of posts.)
As Jim Rogers pointed out, you have a free market in housing in China. If you watch this clip, be reminded not only of Bush socialism, but of the socialism of Palin, “Bush In A Bra.” Rather than shutting F&F down, a solution to which Repbulicans are now paying lip service, Palin wanted to fine tune the mortgage miasma; make it smaller and smarter.
I would add that, as a prelude to the discussion of our economic woes, it has become fashionable for commentators to condemn socialism for the rich; this makes one look benevolent. As execrable as corporatism is, it is no reason to ignore the massive wealth transfer from taxpayers to the poor in the context of F & F, a commitment that has contributed immeasurably to the economic meltdown.