Open Your Wallets America, Fannie Mae Needs Another Bailout
On Friday, May 6th, Fannie Mae asked Uncle Sam for an additional $8.5 billion in aid to help cover their first quarter losses, which amount to $8.7 billion. They attribute these losses to risky mortgages they purchased between 2005 and 2008, in other words, bad business practices. “We expect our credit-related losses to remain elevated in 2011 as we continue to be negatively impacted by the prolonged decline in home prices,” President and CEO Michael Williams said in a statement. Home prices declined 1.8 percent, on average, in the United States during the first quarter of this year. This decline led to more foreclosures and homeowners abandoning properties that were worth less than they owed on their mortgages.
The bailout of Fannie Mae is this most expensive bailout of a single company in U.S. history, nearing $100 billion. Along with the bailout of its sibling company Freddie Mac, the government expects the entire rescue to cost taxpayers about $259 billion. Who are Fannie Mae and Freddie Mac? Their names sound like a sweet old couple puttering around our neighborhoods helping everybody out, their helping everybody out alright, helping everybody out of their money. In reality, they are nothing more than an investment company that buys home loans from banks and other lenders, packages them into bonds with a guarantee against default and sell them to other investors around the world (just a nice way to say selling our property to other countries).
When property values drop like in the first quarter of this year or homeowners default, either by foreclosure or abandonment, because of the no default guarantees, Fannie and Freddie must pay their investors for the losses. Because of buying risky mortgages, their no default guarantee, and the government bailout, the American people are now paying for their losses. Wouldn’t it be nice to know that you could start a business and if it began to lose money, someone else would pay your bills? I don’t remember the government asking me permission to use my money to bailout anyone, I don’t remember it being on any politician’s agenda when he ran for office, so how did I get stuck with the bill? The same way we get stuck with most things we don’t want or need to pay for.
Why is the government so interested in bailing out these two companies? Because of their size, together Fannie and Freddie own or guarantee about half of all mortgages in the U.S., nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of all new mortgages over the past year. Ninety percent, that’s hitting pretty close to a monopoly, which the government is suppose to be dead against; remember they broke up Bell Telephone and recently drug Microsoft before congress. Then again, I guess it’s useless to drag yourself before yourself, meaning that since Fannie and Freddie are now government controlled, the government would be placing itself before congress. It is a little ironic that a company accused of mismanagement is now controlled by another entity that is infamous for mismanagement.
It’s kind of confusing, all I know for sure is that I’m sick and tired of seeing my tax dollars go to major corporations to bail them out simply because they mismanaged things in the first place. Especially when they use that bail out money to award their corporate officers outrageous bonuses. This is what it boils down to, if you have a mortgage and are paying taxes, you are actually paying for two houses, but in the end, you are only going to own one.
Of course, let’s be fair, Fannie and Freddie are suppose to pay that bail out money back with interest. If and when they do, I don’t believe that Uncle Sam is going to send the American taxpayers their share of that collected interest on our money along with a thank you note.
If you are tired of seeing our tax dollars being used to pad the pockets of major corporations, let someone know how you feel. On the contact page of this blog are the names, addresses, and website links to President Obama and the Senators from every state; use them. Also, this is a blog site, it’s meant for you to comment about what I wrote so that we may share ideas. Whether you agree with me or not, let me know.