Fannie Mae Gets Another $15.3 Billion Of Taxpayer Money

On Friday Fannie Mae announced a loss of $16.3 billion for the fourth quarter of 2009.:  It then ran hat-in-hand to the Treasury, requesting another $15.3 billion in taxpayer aid.:  That makes $76.2 billion that has so far been requested by Fannie Mae.:  Oh, and Fannie says yet more of your money will be needed in the future.

Let us not forget that Fannie Mae, with its implicit government guarantee, was a primary contributor to the mortgage and financial crisis that began in 2008.: :  Under pressure from politicians to expand home ownership, Fannie gobbled up subprime mortgages like it was nobody’s business. Issuing banks knew they always had a buyer to take the risky loans off their hands, so predictably responded by offering more and more of them for less and less money down.

Investors kept giving money to Fannie to take big risks with the understanding that the federal government would come to the rescue if things ever went south.:  This was the implicit guarantee.:  They got all the upside with none of the risk.:  These factors combined to greatly distort the housing market and the rest is history.

Unfortunately, our government isn’t all that interested in learning from history.:  Instead of an implicit guarantee, Fannie now has the explicit backing of U.S. taxpayers and an unlimited credit line at Treasury.:  Moreover, the political pressure to put people in homes they cannot afford has not let up.:  Thus, it’s no surprise to learn that Fannie’s chief executive thinks it is the “overriding” mission of his company to keep people in their homes rather than to protect his investors, which just so happens to be the taxpayers.

So long as Fannie Mae and Freddie Mac exist as government organs, these kinds of misplaced priorities will persist.:  The only solution is to abolish them and leave mortgages to the private sector.

Brian blogs at Conservative Compendium.

Brian Garst

Brian Garst is the Director of Government Affairs for the Center for Freedom and Prosperity, a non-profit think tank dedicated to preserving tax competition and free markets. He also blogs at BrianGarst.com.

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