The Practical Philosopher's Blog

Using the practical application of timeless wisdom to address modern issues

Socialist Siblings: The Government-driven Disaster of Fannie Mae and Freddie Mac

 Those politicians and liberal media that are intent on obscuring the root-causes of the current economic downturn blame it on Bush, Republicans, and free-market capitalism- anything but themselves. The plain truth is that government meddling in the private sector has led to the current economic crisis.


The prime culprits of the crisis are Fannie Mae and Freddie Mac. But what are these entities? Are they greedy, profiteering businesses? In a Business and Media Institute article on this Enron-like fiasco, we find out these entities are a bizarre attempt by the government to pass itself off as a ‘regular’ business: 

    Today, both Fannie and Freddie are government-sponsored enterprises (GSEs). They were created by government charters with the purpose of increasing home ownership and access to lower interest rates, with the implicit backing of the U.S. Treasury Department.


     According to a 2002 publication about GSEs from the American Enterprise Institute, “GSEs are hybrids that combine the characteristics of public and private organizations. Their ownership and their control are private, but the government provides them significant subsidies, including tax and regulatory advantages, and permits them to fund their activities almost as if they were part of the government.”

 So here we have, like a hostile foreign intelligence operation, a business front that pretends to be a legitimate company while pushing a distinct political agenda. On top of that, it has the unfair advantage of implicit government underwriting of what ever good or bad behavior it exercises in the open market. It would seem evident that any ‘business’ that has the financial reserves of the entire US Treasury behind it could soon become a monopolistic beast. Not surprisingly, the Business and Media Institute article noted that: 

 Together Fannie and Freddie “control 90 percent of the secondary mortgage market, and nearly 50 percent of the total mortgage market,” according to Investor’s Business Daily (IBD).

So after dumping more than 5 trillion dollars of sub-standard, but high-profit mortgages into the US and world markets, we have the claim that free-market capitalism has ‘failed’ and that like irresponsible children, businesses need government regulation to avoid causing further ‘damage’ to the economy. Again, this is either a statement by those ignorant of the facts, or those that are anxious to obscure the failure of their politically socialist policies- policies that emotionally declare that the ‘downtrodden masses’ have a ‘right’ to a house, but completely ignore the reality that these same people must first have the financial ability and reliability to assume a large responsibility like a home mortgage. The inherent socialist-nature of this approach was noted by the press as well: 

     But this [the economic downturn] isn’t an example of market failure according to IBD [Investors Business Daily] and The Wall Street Journal. The Journal said both GSEs are examples of socialism in disguise.


     “We haven’t suddenly become socialists. What taxpayers need to understand is that Fannie and Freddie already practice socialism, albeit of the dishonest kind. Their profit is privatized but their risk is socialized,” said the July 12 editorial.

Read the rest of this article here: 19 Times Bigger than Enron, and the Networks Didn’t See It Coming”


Filed under: Economy, , , , , , ,

One Response

  1. […] banks are ‘guilty’ of doing too many ‘predatory’ loans (even though the Government and Leftist ‘Social Justice’ created this situation) and they paid their execs too much, so […]

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