The Housing Hole Deepens

[Geee]

Front Page Magazine:


The gravy train at Fannie Mae and Freddie Mac keeps pouring out millions in pay to the top executives running the disgraced tax-funded mortgage companies no matter how poorly they perform. As CNNMoney.com reported Dec. 31, Fannie (FNMA) chief executive officer Michael Williams and Freddie (FMCC) CEO Charles Haldeman each stand to rake in $6 million as indicated by company filings that outline pay guidelines, plus deferred compensation of an unknown amount.

These are rewards for a period when the federally supported companies suffered $28 billion in losses through three quarters of 2010 as well as running up the bill at the U.S. Treasury of $150 billion. How proud all Americans must be, especially those on whose homes have been foreclosed. And to think these appointed “saviors” of the housing market now run the biggest lenders of risky mortgages that were largely the cause of the housing bubble and the ensuing collapse of the American economy.

Today Freddie and Fannie and the 12 federally sponsored home loan banks provide $5.9 trillion in funding for the country’s mortgage market and financial institutions. Fannie and Freddie, referred to as “government sponsored enterprises,”or GSEs, have always had a mission, at least in theory, of socially desirable lending. They have bought mortgages from banks, packaged the loans into financial securities and sold them to investors in the secondary market. The GSEs were encouraged by liberal Democrats in Congress to make excessively risky loans to make the “American Dream” of home ownership possible for even the poor and irresponsible.

Freddie and Fannie have now become the biggest and deepest black holes for taxpayers as we creep out of the recession. The Christian Science Monitor in a story in August said the mortgage giants had become a $5 trillion question. They fell into a bankruptcy-style conservatorship two years ago. They now own or guarantee about half the mortgage debt in the U.S. The capacity of the housing market and the economy itself largely depends on what happens to them. In a conference on how to reform the GSEs, it was generally agreed that the risk in future recessions could be even worse without Fannie and Freddie or some system to ensure that mortgage credit is available even during another banking crisis.