• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • The Left Has Learned Nothing from Fannie/Freddie Failure

    Earlier this month, the United States doubled its outstanding debt obligations in a single day. What happened? Taxpayers were forced to honor the implicit guarantee the federal government made years ago to back up Freddie Mac and Fannie Mae’s financial obligations. Freddie and Fannie are at the heart of the current Wall Street crisis. Under the politically popular guise of ‘expand homeownership‘ Freddie and Fannie urgently pushed people who could not afford homes into loans they could not pay back. They successfully pressured Congress into providing as little oversight of their activities as possible, and even when they were caught red handed inflating profits, they successfully beat back any real reform.

    Despite what defenders of big government on the left claim, Fannie and Freddie were deeply involved in subprime mortgages as well. In 2004 alone, they bought 44% of all subprime securities. Freddie and Fannie were created to get more money into the real estate market. Every dollar they pumped into subprime securities only made the real estate bubble worse.

    So now that Freddie and Fannie have blown up and the federal government has had to bail them out, what does the left want to do with them? Nothing new. Just patch them up, pat them on the head and leave them be. A Freddie lobbyist tells The Hill: “It’s like a kid who gets straight A’s and then gets a DUI. Is the kid [messed] up? No, he made a mistake. … You can’t just get rid of Fannie and Freddie.”

    Senate Banking committee chair Chris Dodd (D-CT) echoes the lobbyist line: “I think the burden falls on them to describe what they’re going to put in its place. And if their argument is we don’t need anything in its place, then you just dealt a very severe blow to the residential mortgage market and homeownership in this country.”

    There the left goes again. Insisting that without government intervention everyone would be homeless. But, as always, the facts are just not on the left’s side. When Freddie and Fannie’s impact on real estate markets have been studied, the evidence shows Freddie and Fannie do not reduce mortgage costs for home owners. Instead, all the government entities seem to do is score huge profits and squeeze out the private sector.

    That is why Freddie and Fannie ought to be broken up and sold.

    Posted in Ongoing Priorities [slideshow_deploy]

    2 Responses to The Left Has Learned Nothing from Fannie/Freddie Failure

    1. Pingback: Morgage Meltdown Basics | The Sundries Shack

    2. George Mason says:

      The US is basically a bankrupt economy. Remember Ross Perot and his utterances. Perot blamed the nation’s economic problems on the government’s inability to contain deficit spending ($350 billion in 1992) and pay off the ever-increasing national debt (a little over $4.1 Trillion in ’92, less than half of what it is now). I am sure the Chinese have trillion USD investments in the US which is salvaging the US economy from total ruin. I am sure Iraq and Afghan war costs (which is deliberately overlooked by the CBO and the biased and unfair US media) are also adding up to the swelling crisis. The capitalist US economy has resorted to socialist principles of nationalization and interventions in the markets to retard the downslide far worse than the Great Depression. You even see the Bush administration trying to deviate the focus away from this financial fiasco by labeling Russia as isolationist and irrelevant which is an irresponsible and dangerous statement from a person who has hardly two months left in her dull fruitless career.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.