OPINION: Behemoths Fannie and Freddie bankrupting the US

[Geee]

The Hill:

In a category more worthy of shame than admiration, the award for the biggest government bailout goes not to AIG, General Motors or Bank of America, but to the financial behemoths known as Fannie and Freddie. To date, these loss-making government-sponsored enterprises have cost the American people more than $150 billion, with potentially tens of billions more yet to come.

For several decades, Washington has subscribed to what is known as the affordable housing mission, which states that homeownership is not only an opportunity worth protecting but an actual right to be upheld by government. Fannie Mae and Freddie Mac — two government-sponsored enterprises (GSEs) — were granted government monopoly power over a significant segment of our housing market to securitize mortgages for those who, in many instances, could not afford them.

Thanks to their government guarantee, Fannie and Freddie easily underpriced all private competition, creating a system in which they ultimately privatized their profits and socialized their losses. Meanwhile, financial institutions were mandated, incented or cajoled into loaning money to pay for irresponsible home purchases.
The result? With record levels of homeownership — and with 13 percent of homes in America being vacant — came inflated home prices, record numbers of foreclosures, billions in losses paid for by the American taxpayer, and trillions of dollars in exposure to potential future losses. Ultimately, expensive GSE subsidies have ended up benefiting borrowers little or not at all. This is federal policy run amok.

[NCTexan]

 

US News & World Reports

 

Barnie Frank when rejecting the Bush effort to reform Fanny/Freddie in 2003 -

 

"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."