"Quasi gov't agencies like Freddie and Fannie" Sarah imPalin on 20/20

[justiceischeap]

So no one has told her yet that Freddie and Fannie aren't gov't programs?

[Jennicut]

1. Stupid stupid woman.

She really has no clue, does she?

[justiceischeap]

2. Seems not. What's sadder is that her supporters just don't care

And I'm not referring to the dyed in the wool GOPers but her, "We've both got boobs" supporters. (I can say that 'cause I have boobs too)

[nc4bo]

3. Why was she picked again?! We're doomed if they win. DOOMED. nt

[1corona4u]

4. Wow...just wow....

too bad we're the only ones that care....

[Warren Stupidity]

5. In fact they were pilot privatization efforts

from our friends the chicago disaster capitalism gang. They once were quasi government agencies, and then they were pushed into the private sector where they are now being used to loot the treasury and bilk the taxpayers in yet another bailout the billionaires welfare scam.

Palin is as dumb as a moose.

[ComplimentarySwine]

6. I don't understand the whole home-loan thing

I haven't bought my first house yet because I'm still trying to pay off some student loans, etc., so I don't really know who all of these companies are. I looked up Freddie Mac in Wikipedia, and it says that it's a privately owned, government sponsored enterprise. When I looked up Government Sponsored Enterprise in Wikipedia, it says that it's part of a group of financial services corporations created by congress.

How can congress create a privately-held corporation? Or, did some freeper mess up the wiki to make the pubs look better?

[soothsayer]

7. here's the story. FDR created Fanniein 1938 as part of the New Deal.

Idea was to free up a bunch of money for home ownership after the Great Depression and stock market crash, since banks didn't have enough to go around. Fannie doesn't loan money directly to individuals. That's what primary lenders, like banks and S&Ls and mortgage companies, do. The way it works (in the so called secondary mortgage market) is that say you deposit $100,000 in a bank. Now the bank can lend me your $100,000 to buy a house. Now they don't have any money on hand to lend to others or to give back to you if you want it. So Fannie buys that mortgage from them, for a fee. The bank keeps a cut of the interest, Fannie gets a fee from the bank for taking it off their hands, and can lend that $100k out all over again. Then Fannie, so it can still have money to buy more mortgages, bundles my mortgage together with dozens or hundreds or thousands of other ones and sells them to investors. Investors buy the bundle (called a mortgage backed security, or MBS) and sit back and collect the money (including interest---that's the profit part for the investor) that all those mortgage holders are paying on the loans in the bundle. Freddie does the same thing (provides liquidity for lenders) and was created to be a competitor of Fannie's, to keep Fannie from getting fat and lazy and overcharging on its fees. The gov't also privatized Fannie at some point (80's?) and let it become owned by shareholders---Freddie might have been created AFTER the privatization, I'm too lazy to look it up---BUT they gave Fannie (and Fred) a charter to help create affordable housing. So Fan has to spend $500M a year helping low income communities fix up their houses and apt buildings, and make sure there are decent places for folks with low incomes to live. That's the funky part: they're halfway trying to become profitable for their shareholders, but halfway bossed around by Congress to fulfill this Charter. As a result of the charter, they get some tax breaks so the shareholders don't get totally screwed by the charter. Oh--Fan and Fred also guarantee that they will pay off any bad loans. When you bundle a bunch of loans together, in a normal market, maybe one or two will go south. Fannie and Freddie can afford to cover that for investors. But when LOTS of loans start failing, like they are now, then Fan and Fred struggle to be able to cover the losses.

The reason the MBSs that fan and fred sell have been attractive to investors is that there has been an implicit guarantee that the gov't would back them up if they ran out of cash to cover the bad loans. The gov't never exactly said they would (except that fan and fred were allowed to borrow a few million from the treasury, tho neither ever borrowed a dime) but people assumed it was true. And now it kind of IS true.

So yeah, they're shareholder owned (still, to this day) with a mission to provide liquidity to the mortgage market and a gov't charter to provide affordable housing. The government is running them temporarily until the market stabilizes, and then who knows what will happen.

[ComplimentarySwine]

9. Wow, what a great reply

Thank you for taking the time to help educate me, it's really appreciated.

[soothsayer]

10. You're welcome! Glad it was helpful. Ginnie Mae was also spun off from Fannie

when Fan was privatized (when Fan was spun off as a company that could be owned by shareholders). Ginnie's really tiny compared to fan and fred. There's also Farmer Mac, which provides liquidity for loans that go to the rural agricultural market. Then there's also Sallie Mae (student loans).

There's also Fannie May candy, and used to be Fannie Farmer, too, when I was a kid. But they're REALLY not related to the GSEs...!

[democrat2thecore]

8. They ARE called quasi-government entities. Just like the Postal Service.

She screwed up enough without making stuff up. Or, maybe some don't realize that Freddie Mac and Fannie May are quasi-governmental, but autonomous, corporations. Exactly like the U.S. Postal Service.

Edit to include the beginning of this NPR story.....

Why Fears About Fannie And Freddie Are Growing
NPR.org, July 11, 2008 · Concerns about the financial stability of housing finance giants Fannie Mae and Freddie Mac — and whether they might need a federal bailout — have sent shares of the two companies tumbling.

The two firms, which have a quasi-governmental status, were chartered by Congress to help make money for home mortgages more readily available. Together they hold or guarantee about $5 trillion worth of mortgages, making them key players in the nation's housing market. As credit markets have dried up, Fannie and Freddie have played a pivotal role in keeping mortgage markets afloat. The fear is that the failure of one or both would wreak havoc on the nation's financial system — and the broader economy as well.
http://www.npr.org/templates/story/story.php?storyId=92489068

A quick Google search will show they are indeed quasi-government private corporations, sometimes called, "government-sponsored enterprises."

Of course, Sarah Palin probably didn't know any of this until her tutoring over the last 72 hours.