Sep 09, 2008
We read in the NYTimes this morning¹ that the federal government is taking over management of Fannie Mae and Freddie Mac, replacing the boards and officers with federal functionaries. Their rationale: “Publicly, administration officials have tried to bolster the companies because the nation’s mortgage system relies on their continued ability to purchase mortgages from commercial lenders and pull the housing markets out of their slump.”

The FM/2 failures stand to cost billions of taxpayer dollars in the near future. The home mortgage mess, combined with the Iraq mess, will add trillions more to our already $9.67 trillion national debt.² Foreclosures are up, ruining the savings and the lives of millions of Americans. And since 2003, the CEO of Freddie Mac has walked away with $38 million in compensation.

Can someone tell us why this should be? Can someone tell us why those “commercial lenders” should be allowed to make loans they have reason to believe are bad ones—indeed, to actively pursue insolvent borrowers and hornswoggle them into signing up for adjustable rate mortgages that only look good until the first adjustment puts them out on the streets—then be able to resell them to a government-guaranteed corporation where, when they go belly up, as millions have, the taxpayer picks up the loss? And expropriate—you certainly cannot characterize it as earning—millions in “compensation” while they’re doing it?

We will tell us why. Because we let them. Because we were so busy shopping and following the vicissitudes of Paris Hilton and watching television and working two jobs that we failed to notice, a few years back, that the henhouse had been turned over to the foxes. And now the henhouse is decimated,³ middle-class income has deteriorated,⁴ the foxes are fattening up on easy pickings,⁵ and we are looking around for a third job.

What will it take to wake us up, and may it not, by then, be too late?
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¹U.S. Rescue Seen at Hand for 2 Mortgage Giants, from the New York Times, September 6, 2008 (free registration may be required) (Accessed September 6, 2008)
²U.S. National Debt Clock, from information obtained from the U.S. Department of Treasury (Accessed September 6, 2008)
³Foreclosures in Connecticut, Nation at Record Rate, from the Hartford Courant, September 6, 2008 (Accessed September 6, 2008)
⁴Earning Less and Dying Younger: How the Growing Strain on America’s Middle Class Is Pummeling Our Health, from Alternet.org, September 4, 2008 (Accessed September 6, 2008)
⁵Exxon Shatters Record Profits, from CNNMoney.com, February 1, 2008 (Accessed September 6, 2008)
tags: Economics | Business | Politics