Gov Mac
If you have been living under a rock you may not have heard the the ol’ US of A has taken over both Freddie Mac and Fannie Mae. Given the complete debacle that these two companies turned out to be, and the fact that a huge portion of the US economy, and oddly enough the world economy, is based on these two companies not DYING, the US Treasury Department decided it might be wise to step in and take over.
So what does this mean? Allow me to elude to some things, via facts and what not:
- The US Government plans on supplying each company with “no more than 100 billion dollars” of your tax dollars. In other words you, the tax payer, who may have a loan from these two companies, is also paying to ensure that they stay afloat. That is kind of like making sure that the local Loan shark, Fat Tony, is well fed and has a roof over his head so that you are able to keep paying him even though he loves to spend your money on hookers. Maybe that was a tad over the top - but I think you get the point.
- The US Government is taking, in exchange for your tax dollars, 2 million shares of stock of each company, which will yield something like 10% of the total dividends these two companies are SUPPOSED to send out every year. In other words, through spending your tax dollars on the investment into these two companies, who btw own something like 5 trillion dollars in home mortgages the government will receive residuals. How nice of them to make money on your money off of a company that already owns your house. Oooops, being a bit rough again aren’t I?
- There has been no talk of handing the companies back the reigns that I can find. What does this mean? One COULD ARGUE that it means the begining of mortgage and banking nationlization - of course one could also argue that President Bush has an IQ greater than an azalia. Who I am to judge?
- If the government can nationalize the mortgage and banking system, then why not health care? Oh wait! That is Socialism!
- According to NPR this morning the biggest gainers from this little situation are the Chinese. Wonder why? Well they have loads of stock in these two companies (seriously don’t even get me started on that) and thus if Freddie and Fannie faltered (cute right to that) then the Chinese would lose loads of cash. Tragic. However, since the USA government decided to step in, the Chinese are actually guaranteed to get their money by, you guessed it, YOU! That’s right, your tax dollars are going to be used to make sure that the Chinese, who took a chance in investing in a company, will now get back all their hard stolen, er spent money.
I know, I am an evil, jaded sum-a-bish. Tell you what - search teh web, read as much as you can, and if you can find a non jaded writeup on this that says I am totally wrong, PLEASE post it here and I will gladly share it with the planet. That said, ask yourself something - why is the government trying so hard in the media to convince everyone that this is a great thing? Did that happen once before? COUGHinvadeiraqandkillrandombrownpeopleforbasicallynoreasonwhatsoeverCOUGH!! Excuse me, had something absolutely appalling stuck in my throat.
More on Mae and Mac
I wrote a piece a few days back on Fannie Mae and Freddy Mac that spoke a bit to the idea of how business and state are mixing. Well to up that this happened. I suggest you read it. According to National Public Radio news this morning this basically means that Fannie Mae and Freddie Mac are going to be bailed out by your tax dollars. Let’s do the math.
- Fannie Mae and Freddie Mac are two lending companies, both have strong political ties to our government.
- Fannie Mae and Freddie Mac hold together over 5 Trillion dollars in Mortgages.
- During the housing bubble both of these companies funded thousands of borderline frivolous mortgages - leading to massive foreclosures - supposedly 1.5 million of them.
- Fannie Mae and Freddie Mac give out record bonuses to their executives.
- You, the tax payer, are now having your tax dollars rerouted to support these two companies who have been identified as being frivolous in nature. In other words your tax dollars, which could be going to say educating your kids or just maybe to help some of our soldiers abroad not DIE, is being used to prop up two mega giant corporations who were run quite closely into the ground.
- Is anyone being brought up on charges? You’d think the United States of America having to bail out two major corporations from potential bankruptcy would bring about some form of inquiry. You’d think that someone just might be investigated and just maybe someone might be brought up on charges- maybe someone who received in the hundreds of millions of dollars in bonuses. JUST MAYBE.
Nope.
The Elephant in the Room
Ever heard of Fannie Mae? Freddie Mac? I had heard of them, but until two days ago I didn’t really realize why they were important. (The links I have provided point to write-ups done on these two corporations dating back several years, prior to the housing bubble bursting.) Prior to learning about them I had just assumed that they were a couple of gender specifically named investment firms. I am a person who will freely admit when he is wrong, if it happens, which is rare, just ask my wife, and on my assumption about Fannie and Freddie, well I couldn’t have been any more off target.
So who are they and why are they important? Let me start off by telling a small story. A coupld of days ago MoMagic did his quarterly post on our site about global warming. MoMagic’s posts are typically polically charged, amazingly well written, and always a joy to read. Just prior to leaving my office for my arduous drive home, I took a stab at reading his article and then grabbed up my things while pondering the world I live in. I made my way to my car and turned on National Public Radio (NPR), my favorite station just in time to hear their bit on Fannie and Freddie.
Here is what I learned:
1) Fannie and Freddie Mac are the two largest investors in the housing market in the United States of America.
2) Collectively they hold over 50% of the home loans in America.
3) Collectively they have over 5.1 Trillion Dollars in assets. Yes, Trillion.
Now these are not my facts, this is what was said on NPR. They then went on to talk about something that scared me further, realize I was already alarmed to a point considering I have been following the housing market and its demise quite avidly, being from California one tends to. The thing that grabbed me was a statement about how some people aren’t sure who is running who - Is Congress running Fannie and Freddie or is it the other way around?
Think that through for a minute. Close your eyes and imagine the Jeopardy music playing in the background. Alex Trebek can twiddle his thumbs or just try to look as pompous as ever while your brain searches for the fear that I just put to screen.
Got it? Here is the Elephant in the Room that nobody wants to talk about - Fannie Mae and Freddie Mac are so big, and so involved in politics, that the possibility of their demise basically means the downfall of our economy. This is not some lighthearted attempt to scare the crap out of adults during some late night bed time story. If these two go under you end up with 5.1 Trillion dollars of oh my god. The question then is how is this even possible? Furthermore how can we prevent it?
Ladies and Gentlemen, as NPR put it this morning, I direct you to the French Revolution Era. During that time Government was directly involved in the business affairs of her citizens. The United States of America, a Federal Republic, has a government that is supposed to help regulate business affairs but is also supposed to let much of business just do her thing, we being a capitalist economy and such. Given this fact, Fannie Mae and Freddie Mac were financially backed by the government to assist people with buying a home. Many people consider them to be borderline non-profit organizations. So why then have these two financial machines been able to poor so much money into politics? why have they been giving out bonuses to their employees to the tune of hundreds of millions of dollars per yer? How have they been able to do both of those things while they were on their way to belly-up land?
Simple. Yesterday the Secretary of the Treasury asked for a blank check to buy as much of these two companies in stock as possible. See their stocks both dropped 25% yesterday on the news that they may both die a tragic death. This just leads to further problems for the companies, and if we factor in politics, and the economy, now is the time for our Monarchy, er, Government to step in and help them by buying up as much of both of them as possible. Cue the Jeopardy music again. THE GOVERNMENT IS LOOKING TO BUY COMPANIES THAT OWN OVER 50% OF THE HOME MORTGAGE LOANS IN THE UNITED STATES OF AMERICA. In other words, the government is now directly involved with the economy. As NPR put it, welcome to the path to Socialism! Have a good day, Comrades.
