# Gov't conservatorship of Freddie Mac & Fannie Mae! **URL:** \ **Category:** Great Debates\ **Created:** [September 6, 2008, 2:44am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279 "2008-09-06T02:44:41Z")\ **Posts on this page:** 13\ **Page:** 3
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 9, 2008, 3:15am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/41 "2008-09-09T03:15:23Z")
> [@Johnny\_Angel](#): > > I demand that as soon as the government gets control of Fannie Mae and Freddie Mac they immediately farm out the administration of these out to private companies without any oversight or regulation, because only the free market is competent to manage stewardship over a badly mismanaged free market. How in the world are FNMA and FHLMC examples of the mismanaged free market? The government let them operate under special rules that no other financial institution was allowed to operate under and implicitly guaranteed their debt. That sounds like pretty much the opposite of the free market. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 9, 2008, 3:17am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/42 "2008-09-09T03:17:50Z")
> [@Mr.Moto](#): > > Uh huh. Let’s look at some recent Freddie Mac and Fannie Mae board members who really should have caught this shit: > > Fannie Mae > > James A. Johnson, former chairman and CEO: Aide to Vice President Walter Mondale; recently led Sen. Barack Obama’s vice-presidential search team > > Jamie Gorelick, former vice chairwoman: Deputy attorney general under President Bill Clinton; former Defense Department general counsel; member of 9/11 Commission > > Franklin D. Raines, former chairman and CEO: Budget director under Clinton > > Thomas E. Donilon, former executive vice president: Former assistant secretary of state under Clinton; senior adviser to Michael Dukakis’ presidential campaign; national campaign coordinator for Walter Mondale’s presidential campaign; congressional liaison for President Jimmy Carter. > > Robert B. Zoellick, former executive vice president: Former deputy secretary of state and U.S. Trade Representative under President George W. Bush; currently president of the World Bank > > Louis J. Freeh, board member: Director of the FBI under Clinton; federal judge > > Stephen Friedman, former board member: Assistant to Bush for economic policy > > Michele Davis, former senior vice president: Deputy assistant to Bush; currently assistant secretary of the Treasury. > > Wayne Berman, outside lobbyist: Assistant Secretary of Commerce under President George H.W. Bush; senior adviser in Bush-Cheney presidential transition; currently a fundraiser for Sen. John McCain’s presidential campaign. > > Steve Ricchetti, outside lobbyist: Deputy chief-of-staff to Clinton > > Kirsten Chadwick, outside lobbyist: Special assistant to President George W. Bush for legislative affairs; currently a fundraiser for McCain’s campaign. > > Freddie Mac > > Richard F. Syron, chairman and CEO: Deputy assistant secretary of the Treasury > > Ralph F. Boyd Jr., executive vice president: Assistant attorney general for civil rights > > Dennis DeConcini, former board member: U.S. senator from Arizona > > Robert R. Glauber, board member: Undersecretary of the Treasury under President George H.W. Bush > > David J. Gribbin III, former board member: Aide to Vice President Dick Cheney; assistant secretary of defense under President George H.W. Bush > > Harold Ickes, former board member: Adviser to President Clinton and Sen. Hillary Clinton; member of the Democratic National Committee. > > Rep. Rahm Emanuel, former board member: Senior adviser to President Clinton; former chairman of the Democratic Congressional Campaign Committee and chairman of the House Democratic Caucus. > > Susan Hirschmann, outside lobbyist: Chief-of-staff to former House Majority Whip Tom DeLay of Texas > > Michael J. Bates, outside lobbyist: Campaign official for President Reagan, presidential candidate Bob Dole, President Bush. > > Martin Paone, outside lobbyist: Secretary of the Senate > > J. Patrick Cave, outside lobbyist: Acting Assistant Secretary and Deputy Assistant Secretary of the Treasury > > Susan Molinari, outside lobbyist: U.S. Congresswoman from New York > > [From here.](http://www.npr.org/templates/story/story.php?storyId=92540620#92534513) > > Now, how is just an election supposed to magically clean this up - just switching from Clinton to Bush did nothing. And let’s remember that Clinton appointees stayed on after the Clinton term - Gorelick was vice-chairman of Fannie Mae from 1997 to 2003. This is a very illuminating post. I can’t believe that their boards are essentially made up of nothing but politicians. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 9, 2008, 3:21am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/43 "2008-09-09T03:21:34Z")
> [@Hyperelastic](#): > > The US government is using taxpayer dollars to take an ownership stake in two corporate turds that, had they been held to the same rules as any other mortgage company, would have been bankrupt years ago. Had they been held to the same rules, they never would have gotten in this bad of shape to begin with. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 9, 2008, 4:09am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/44 "2008-09-09T04:09:03Z")
> [@threemae](#): > > Would anyone in this thread care to have a serious discussion about the events leading up to or the actual bail out of the FM’s? Since no one has responded to your very reasonable request … I think the underlying problem was that the FMs were in the twilight zone between being government supported and totally private. The concept was that they would provide support for safe loans, with good down payments and credit worthiness. However, to get the stock price up and to get the bonuses, they started sneaking in lower quality loans. It seems inevitable that when there is assurance that the government be the lender of last resort, and no regulation, this kind of thing happens. It is similar in this respect to the S&L debacle. It is going to happen again and again as long as deregulation is an article of faith even in these situations. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [September 9, 2008, 4:33am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/45 "2008-09-09T04:33:14Z")
> [@Voyager](#): > > It is going to happen again and again as long as deregulation is an article of faith even in these situations. Deregulation implies that the government reduced regulations. I don’t think I would agree that this occurred with these entities. They were poorly regulated to begin with. ---
**Author:** ![threemae](https://avatars.discourse-cdn.com/v4/letter/t/5f9b8f/32.png) [@threemae](https://boards.straightdope.com/u/threemae)\ **Post date:** [September 9, 2008, 5:36pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/46 "2008-09-09T17:36:26Z")
> [@Voyager](#): > > However, to get the stock price up and to get the bonuses, they started sneaking in lower quality loans. I think that’s fair. To be honest, I don’t know why the United States seems to partial to creating government and private sector “mash-ups.” For instance, the FM’s, private security contractors in Iraq, or Medicare plans administered through insurance companies. It’s as if conservative politicians have an abiding faith in the abilities of private entities to perform tasks in a more efficient manner than a government agency’s ability to perform the same task, even when the government has not structured its compensation in a manner so as to ensure it gets what it really wants. The problem, of course, is that the government doesn’t seem to be able to function as a critical consumer that’s always looking for a cheaper supplier in the same way that corporations or personal consumers are. I don’t think that any company would have accepted the build-quality of a lot of the infrastructure installed in Iraq by Halliburton, but our government seems determined to let it slide. ---
**Author:** ![slaphead](https://avatars.discourse-cdn.com/v4/letter/s/e9bcb4/32.png) [@slaphead](https://boards.straightdope.com/u/slaphead)\ **Post date:** [September 10, 2008, 8:17am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/47 "2008-09-10T08:17:08Z")
> [@LonghornDave](#): > > This is a very illuminating post. I can’t believe that their boards are essentially made up of nothing but politicians. Why not? For the last half-century or so they have served no function whatsoever other than to provide a government subsidy to middle-class housebuyers and well-larded sinecures for Beltway retirees. **threemae** - Monday morning quarterbacking? You have to be kidding. You don’t get more mainstream than _The Economist_ and from [here](http://www.economist.com/finance/displaystory.cfm?story_id=2577440) > [@](#): > > OF ALL the things that might upset America’s financial system, top of most lists are Fannie Mae and Freddie Mac. The two companies stand behind $4 trillion-worth of mortgages; when that much money is involved, even a minor glitch can send tremors through financial markets. Recently both have had more than their share of problems with their accounts. There are shortcomings in their regulation. If there were a disaster, no one could say that it had come without warning. > > Re-regulation has been talked about for years. But Fannie and Freddie are reckoned to be among the cleverest and most generous lobbyists in Washington. When the prospect of new rules looms, as it did recently, they seek popular support by running melodramatic advertisements claiming that change could make homes unaffordable for many Americans Article dated April 2004. This trainwreck was seen coming a long time ago - it’s just that no-one gave a shit. ---
**Author:** ![threemae](https://avatars.discourse-cdn.com/v4/letter/t/5f9b8f/32.png) [@threemae](https://boards.straightdope.com/u/threemae)\ **Post date:** [September 10, 2008, 1:22pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/48 "2008-09-10T13:22:31Z")
> [@slaphead](#): > > **threemae** - Monday morning quarterbacking? You have to be kidding. You don’t get more mainstream than _The Economist_… Article dated April 2004. This trainwreck was seen coming a long time ago - it’s just that no-one gave a shit. I’m referring to this board. I didn’t claim that the FM’s had completely escaped notice of financial professionals, but among the general population, politicians, and this board, I’m not aware of anyone that made a serious effort to fully privatize or nationalize the FM’s when things were going well. Sure, _The Economist_ is relatively centrist, but it’s still heavily focused upon finance and, well, economic issues. Even in the midst of the sub-prime crisis, people were generally still positive on the FM’s ability to continue to provide financing for the housing market. Maybe it’s now apparent that the FM structure was ill-conceived 70+ years ago, but I think that hardly anyone would argue that they should have been drastically restructured in 2007. And is anyone here seriously arguing that they shouldn’t have been taken over in a manner similar to which they were in August or September of 2008? ---
**Author:** ![Discordia](https://avatars.discourse-cdn.com/v4/letter/d/b9e5f3/32.png) [@Discordia](https://boards.straightdope.com/u/Discordia)\ **Post date:** [September 10, 2008, 2:06pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/49 "2008-09-10T14:06:20Z")
> [@threemae](#): > > I’m referring to this board. I didn’t claim that the FM’s had completely escaped notice of financial professionals, but among the general population, politicians, and this board, I’m not aware of anyone that made a serious effort to fully privatize or nationalize the FM’s when things were going well. Sure, _The Economist_ is relatively centrist, but it’s still heavily focused upon finance and, well, economic issues. Even in the midst of the sub-prime crisis, people were generally still positive on the FM’s ability to continue to provide financing for the housing market. Maybe it’s now apparent that the FM structure was ill-conceived 70+ years ago, but I think that hardly anyone would argue that they should have been drastically restructured in 2007. And is anyone here seriously arguing that they shouldn’t have been taken over in a manner similar to which they were in August or September of 2008? Average Joes clueless on financial and economic issues, news at 11! I’m sure the libertarian type people have been pretty upset about the FMs since their inception, but no one listens to them, and a politician running on the platform “I’ll make houses cost more for the average American!” isn’t very likely to get elected. Plus it seems they had their noses in the trough too. I don’t think people were very positive about anything related to the FMs once the sub-prime bubble popped.. The idea of a private company with a guaranteed bailout is daft, and it was daft 70 years ago. As for their bailout, I don’t think seriously thinks they should’ve been left to fail. Depression wouldn’t begin to describe the consequences of doing that. As with so many things in politics, this got pushed onto the next generation over and over because the previous one was enjoying the cheaper housing and didn’t want the dream to end. Now the dream is over, and you pay through the nose for it. Next up, social security! ---
**Author:** ![MilTan](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@MilTan](https://boards.straightdope.com/u/MilTan)\ **Post date:** [September 10, 2008, 2:59pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/50 "2008-09-10T14:59:12Z")
> [@LonghornDave](#): > > Had they been held to the same rules, they never would have gotten in this bad of shape to begin with. I think that’s a defensible position, but it’s not as if the less-regulated mortgage-dealing banks have covered themselves in glory over the last year. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [September 10, 2008, 6:21pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/51 "2008-09-10T18:21:26Z")
It sets a very bad precedent-the American taxpayer is going to pay for the action of thieves in 3-piece suits. Basically, the guys who flipped houses and set up mortgages for people with no income had a field day-and now you and I will pay for it! Much as in the savings and loan disaster, these criminals will be richly rewarded for STEALING US BLIND! Meanwhile, these same people will buy the properties for pennies, and become millionares by reselling them! I ask-where are the lawyers who approved these sales? Where are the crooked loan officers who allowed “no money down” mortgages? I for one am sick of paying taxes to reward white collar crime! ---
**Author:** ![threemae](https://avatars.discourse-cdn.com/v4/letter/t/5f9b8f/32.png) [@threemae](https://boards.straightdope.com/u/threemae)\ **Post date:** [September 11, 2008, 2:38am UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/52 "2008-09-11T02:38:15Z")
> [@ralph124c](#): > > It sets a very bad precedent-the American taxpayer is going to pay for the action of thieves in 3-piece suits. Basically, the guys who flipped houses and set up mortgages for people with no income had a field day-and now you and I will pay for it! The excesses which you are describing are what occurred in the “sub-prime” sector of the mortgage industry. In other words, by definition not the mortgages repackaged by the FM’s. Obviously their capital reserves weren’t enough (although politicians might have criticized for being overly conservative lenders in the opposite situation), but the FM’s simply can’t be accused of such gross negligence in permitting inappropriate mortgages as the other financial entities that have been wiped out by a bursting of the housing bubble. They probably did a lot to contribute to the housing bubble, but that was a direct effect of what people defined their mission statement as. ---
**Author:** ![slaphead](https://avatars.discourse-cdn.com/v4/letter/s/e9bcb4/32.png) [@slaphead](https://boards.straightdope.com/u/slaphead)\ **Post date:** [September 11, 2008, 12:26pm UTC](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279/53 "2008-09-11T12:26:40Z")
> [@ralph124c](#): > > It sets a very bad precedent-the American taxpayer is going to pay for the action of thieves in 3-piece suits. Precendent? More like following a hallowed tradition dating back to the foundation of the Republic. Why do you hate America? [Previous page](https://boards.straightdope.com/t/govt-conservatorship-of-freddie-mac-fannie-mae/462279.md?page=2)