Fannie AND Freddie Totally Corrupted by Democrats

The failure of Fannie and Freddie are well known, but allow them to continue to flourish is insanity. The liberal Democrats will continue to support these corrupt institutions as they provide a large voter base and an influx of taxpayer money to their campaigns.

In the last 6 years, Fannie and Freddie gave salaries and bonuses in the amounts of 216 million to Democrats. This is a good reason not to regulate. Right? Vote Democrat -


FANNIE AND FREDDIE FAILURE FOREVER
Source: Conn Carroll, "Fannie and Freddie Failure Forever," Heritage Foundation, May 6, 2010.

Earlier in the week Sen. Chris Dodd (D-Conn.) told reporters about his financial regulation bill, "We've ended the 'too big to fail' debate. So no longer do I expect any argument to be made that this bill exposes the American taxpayer."

Sen. Dodd's statements are inaccurate, says the Heritage Foundation:

Freddie Mac announced this week that it lost another $6.7 billion in the first quarter of 2010 and therefore needed another $10.6 billion in cash from U.S. taxpayers.

Since formally nationalizing Freddie in 2008, the federal government has already spent $50.7 billion bringing the Freddie bailout total to $61.3 billion so far.

Combined with Fannie Mae's raid on the Treasury, the Congressional Budget Office estimates that the American people will spend $389 billion bailing out the two government sponsored entities by 2019.

So much for American taxpayers no longer being exposed to "too big to fail," says Heritage. In fact, nothing in the Dodd bill does anything to reform Fannie Mae and Freddie Mac. This despite the fact that Fannie and Freddie were key components in causing the very financial crises Dodd claims his bill will forever prevent.

Fannie and Freddie were both created for the specific purpose of making it easier for Americans to buy more expensive housing, says Heritage:

Starting in 1993, political forces pushed Fannie and Freddie to loosen their once strict loan purchasing requirements.

By 1996, regulations required that 40 percent of all Fannie and Freddie-bought loans must come from individuals with below median incomes.

In 1995, Fannie and Freddie began buying subprime securities originally bought and bundled by private firms; one of these firms was Countrywide Financial who, thanks to their status as Fannie Mae's biggest customer, delivered investors a 23,000 percent return between 1985 and 2003.

By 2004, Fannie and Freddie were purchasing $175 billion worth of subprime securities per year from Countrywide and their brethren -- a 44 percent share of the entire market.

There are other factors that helped contribute to the 2008 financial crisis, but Fannie and Freddie's use of their "too big to fail" status to create and grow the subprime security market was essential, says Heritage.

The problems with the Dodd bill go beyond its failure to let Fannie and Freddie wither into extinction, says Heritage.