So, banks crashed and President FDR, in 1938, made the Federal National Mortgage Association. Fannie Mae. He agreed to give them a one billion dollar loan to begin to finance fixed family housing mortgages with low down payments for poor and middle class Americans to have homes for their families when the world was falling apart around them. Wonderful man.
For a fuller history of Fannie Mae and Freddie Mac go here.
Things went along nicely until 1968 when President LBJ found the VietNam War to not only be physically killing the American public but to be financially killing them, also. So, to help us all out, he "privatized" Fannie Mae. Wonderful man, right?
And, to be even fairer to us Americans, Freddie Mac was created to offer competition in the marketplace. Kind of them. No! The two now own 90% of the mortgage market in America. They form 46% or so of the national debt, estimated to be about 5 TRILLION, and the war in Iraq costs us about the same amount.
That means, in plain English, that the Americans with money, almost always the Republicans, but NOT always, now have a privately owned and operated business, which we poorer Americans guarantee to bail out of any trouble no matter what they do with the money, our money.
By the way, they get really low cost money from us, the US public government, and money from our mutual funds, etc. and from foreign investors. They pay no state nor local taxes on that money, and if they screw up royally, we promise to cover their butts 100%--no questions asked. NADA! Don't you want to own a business like that? Me, too!
So, they did what any red-blooded, full-throttle Newly Defined American Capitalist GSE would do, they lied and cheated and stole and spent and cared less. Because they knew that we would fix it and let them do it again, America.
Really, we can't complain when we let our government do this to us. We watched Fannie Mae and Freddie Mac turn their GSEs into subprime and ARM mortgages, and invent Securitization and ABS,SPV, SPE, and SPC and all the other creative offshoots of the Reagonomic Economic Revolutionary new vocabulary and sanctioned behaviors and we didn't stop them.
All of these 'creative accounting' and tortuous ways to suck a few more pennies out of each new loan which were invented in the late 70's, just before the 80s crashes.
The public didn't stop them, the government didn't stop them, their shareholders didn't stop them. Only a crashing market, their falling house of cards, stopped them.
When their gleeful Capitalist spree led to the crashes in the 80s we could have stopped them, but we didn't. We could have once again insisted upon some transparency, some 'well applied regulation', some accountability, but did we? No. Can you say Charles Keating and balloon mortgages and Savings and Loan fraud?
So, now the government has put FM and FM into a sort of Conservatorship, whatever that means. In the meantime, we pay for the same thing again--80s all over again. I ask why?
We Americans always deserve what we get because we NEVER pay attention to what's going on in politics--just to Hollywood, store sales and what is on reality television.
***(Not what's on reality CSPAN or CSPAN II television and we let the other news channels avoid any mention of the things which are really important to us and which we, pea-brained idiots that we are, me included, don't even know to look into. That used to be the job of the press, to investigate and to tell us what they found.)
I'm paying attention now, would you please start to, right now? Thanks.