This is what happens when you privatize profits by transferring risk to taxpayers
Freddie and Fannie are now owned by the government. I’m not debating the need to nationalize them, bail them out and all that. Let’s remember these companies and Bear Sterns (and other banks) are victims of greed and, more importantly, lack of oversight. Via McClatchy:
WASHINGTON — The historic seizure Sunday of mortgage finance titans Fannie Mae and Freddie Mac is expected to bolster the nation’s sinking housing sector by lowering mortgage rates and jump-starting the obscure background market that is vital to home lending.
[snip]
FHFA chief James Lockhart appointed private sector bankers to head Fannie and Freddie and said that their “compensation will be significantly lower than the (respective) outgoing CEOs,” Daniel Mudd at Fannie Mae and Richard Syron at Freddie Mae. He was pointing to a frequent criticism of the for-profit entities that enjoyed implicit U.S. government backing but operated as private companies with huge bonuses for their directors.
Oh - How much did the Fannie and Freddie CEOs make last year (over $30 million a piece I believe) ? Were they worth the money? To them, sure. To tax payers, who get to pick up the pieces, not so much.
Might want to read (or reread) or watch David Cay Johnston.
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There’s actually plenty of reason to question why Fannie and Freddie needed to be nationalized when they were. A lot of this has to do more with protecting investor profits than with saving the homes of lenders. Remember that F&F are already insured and that if they did go under (not really even possible in the first place), the mortgages of all those homeowners would be perfectly safe. It would be very painful for the government to take over at that point, but doable.
However, if F&F are allowed to continue on their present courses, the profits of all those rich people who invested in them would go down the toilet. We’re being asked to take on the responsibility for the investor class, not the working class.
Now, I must say I’m very pleased and proud of Republicans who’ve made such strides into nationalizing the stock market (first wanting the government to spend your SS money on stocks, now this). But I really don’t think that it’s terribly good policy at this point.
Every week there’s another example of Mussolini style corporatism by the Bush junta and their local capos like Maggie Brooks and they sell it by scaring the public about “infanticide”
basically neo-liberalism isn’t pure free enterprise but socialism for the rich. Privatize profits and socialize risks.