Fannie Mae, for progressive politicians, was the cash cow that kept on giving. From its creation under President Franklin D. Roosevelt in 1938 to an explosion in funds, the “Trillion Dollar Commitment”** announced by President Lyndon B. Johnson, Fannie Mae has enjoyed fierce protection from Democrats like Rep. Barney Frank (D-Mass.) and Rep. Maxine Waters (D-Calif.)
Those Democrats and some errant Republicans received campaign contributions from the government sponsored enterprise (GSE) that is one reason the US housing industry is in tatters. When fiscal conservatives demanded more oversight, Waters and Frank attacked them just as Democrats attack fiscal conservatives now.
Democrats repeatedly assured Congress Fannie Mae was just fine, thank you. Legacy media was too busy bashing Bush to take a second look at Fannie Mae.
CNBC just provided a wakeup call about the GSE. Fannie Mae wants $5.1 billion more from taxpayers because of losses.
This isn’t the first time Fannie has approached Uncle Sam with hat in hand. CNBC said, “Since the firm was seized by the U.S. Treasury in 2008, it has needed about $104 billion in government capital injections, although it has paid back about $14.7 billion in dividends.”
For the long, sordid tale of the socialization of the housing market, turn to the Ludwig von Mises Institute where Karen DeCoster and Eric Englund explain how Fannie Mae's failures were downplayed on the pretense the GSE had “a critical role in driving the housing sector” that in turn, drove the US economy.
When Democrats talk about driving the economy over the cliff, they should be reminded that’s exactly where they took housing when they ushered in a socialist approach to the market. George W. Bush may own the Iraq War, but Democrats own Fannie Mae.
Fannie has been caught up in scandals for rewarding loser CEOs and staff (some work for President Barack Obama) with millions in bonuses. Rosy financials were cooked up on the books in a scandal that would have sent most CEOs to federal prison.
DeCoster and Englund wrote in their 2008 essay, “So here we have a company surrounded with much misconception in the financial markets and accused of deceit by its own government overseers. It has chunked away nearly 40% of its profits via restatements of its fraudulent financial statements for recent years.”
The authors predicted the collapse of Fannie Mae in that 2008 essay.
Related Stories and Sources
**[Print source] ‘Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon’ by Gretchen Morgenson and Joshua Rosner; Times Books, Henry Holt and Co., N.Y., 2011. Page 59.
Geithner suggests more multiplexes, admits GSE role in meltdown (The US Report)
Campaign contributions to lawmakers from Fannie Mae (Open Secrets)
(Commentary by Kay B. Day/Aug. 5, 2011)