Comments on: Fannie Mae and Freddie Mac: Do you get it?

By: Roy Jones

Roy Jones — Thu, 18 Sep 2008 02:35:06 +0000

This article makes me wonder if the title is supposed to be ironic because the author clearly doesn't get anything beyond the ten minutes he spent on wikipedia. Fannie and Freddie aren't required to purchase all mortgages… in fact, they're banned from purchasing mortgages that don't meet their guidelines (ie being under $147k, among other requirements). Second, both companies are supposed to act as intermediaries between those supplying mortgages and those buying them. Instead, due to the high profits those mortgages brought in, both decided to just hold them and collect. Too bad high risk portfolios are named so for a reason, and the riskiest were also the best paying. So when the market came crashing down, all these assets they held that they were supposed to SELL became devalued, and the companies suffered.

It's not some flawed business plan that failed, but the greed of the company leaders.

By: John Grey

John Grey — Wed, 10 Sep 2008 17:26:41 +0000

"While I agree that it is a shitty thing to begin bailing out private companies that do not share profits with the general public, if FM/FM were to go under there would be far reaching global & financial ramifications."

Hey, tough shit. If it's not FRE/FNM, then it's Lehman Brothers or CitiGroup or JPMorgan/Chase. If we try to backstop everyone, we're going to find ourselves saddled with $7.5tn in mortgage-related debt that'll never unwind. We're facing a depression regardless. I'd much rather it be on my terms instead of having my taxes hiked 20-30% to keep the pigmen well-feld for a few years.

By: Tyrone Biggums

Tyrone Biggums — Wed, 10 Sep 2008 13:52:13 +0000

While I agree that it is a shitty thing to begin bailing out private companies that do not share profits with the general public, if FM/FM were to go under there would be far reaching global & financial ramifications.

By: Phil

Phil — Wed, 10 Sep 2008 13:32:17 +0000

Of course all of this is taking place in a country that is trillions of dollars in debt, populated by people who think that the national government should always help them out if they are in trouble.
The government has helped out private companies before, look at the airline business. Almost every airline company in the US has been in debt at one point or the other. Many changes have been put into place (automated check-in, no free inflight meals, charging for checked luggage), but overall they are still able to run a failing business model because they have no incentive to change, when they mess up, the government will bail them out. That being said, the US needs the airline industry, so it is hard to say if it is a good or bad thing that the government has intervened.