Fannie and Freddie bailed out by Rich Uncle Sam

Fannie Mae and Freddie Mac, those hillbilly sounding corporations, have been taken over
by their rich Uncle Sam. Now the Treasury will be calling the shots-- and making sure that
the two major entities that buy and guarantee residential mortgages have the deep pocket
resources of the entire US Government.

Fannie began life as a Federal agency, but LBJ let her be free-- and alas, Fannie was a
troubled soul--sometimes known as a Government Sponsored Enterprise- a non-governmental entity that everyone knew was born with a rich Uncle. Fannie
was a for-profit corporation, with private shareholders and investors but few fussy governmental requirements or restrictions.
If it made money, it would earn profit for the shareholders. The executives were well compensated whether or not Fannie or Freddie made money. But if the entities lost money--
they could whine to their rich Uncle--- "Bail Me Out! I Lost My Money! I'm Broke and
Need Lots of Cash, Fast!"

Everyone knew who would have to pick up the bills if Freddie and Fannie went wild and
were broke (It is a bit late for Uncle to admonish either Fannie or Freddie or all
the homeowners who took out more debt than they should have. A home isn't an ATM machine, even if the banks encouraged people to tap into home equity loans). The take-over may cost some $200 Billion-- a Billion here, a Billion there-- it adds up to real money, as one DC politico once noted. On the other hand, home ownership is a legitimate governmental purpose-- and
certainly the Feds don't want hundreds of thousands of foreclosures and mobs of
homeless folks marching on Washington with pitchforks and torches!

But Wall Street was happy with Big Government taking over. The stock market (Dow Jones)
was bullish on the news, and financial institutions were happy-- always good to have
a deep pocket to pay all the bills and avert disaster (100 years ago, it would have been
JP Morgan calling a few bankers into his office to assure them that all was well, and
JP would make sure of it). I suppose we can all sleep well knowing our paternal government
can kiss our financial boo boos and make it all well.

It seems like a win-win, except for the US taxpayers, who may not like the idea of having to bail out two private corporations that sometimes lent money like a tipsy sailor with a wad of cash. But mortgage rates are down, the take-over will help to ease credit, and may ease the housing crisis--which is mostly a matter of perception. If the buyers of homes perceive we are in a housing crisis, we will be in one.

Ironic that a conservative Republican administration has been growing bigger and bigger, taking
on more and more financial responsibilities from the private sector. But better that the government should act than let two hillbillies named Fannie Mae and Freddie Mac
turn us all into trailer trash.

Let's hope people will see mortgages as a means to buy homes within their budgets, and
banks will treat buyers fairly but prudently. Real estate is still one of the best investments
anyone can make-- it (usually) appreciates as it provides both shelter and warmth. And folks
who have invested time and equity in their homes are usually better neighbors and make
for better communities.

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