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Fannie & Freddie: The End of the American Dream?

September 7, 2008

an insightful commentary about finance, trust, drama and taxpayer slavery by E.J. Manning

For years, Freddie Mac and Fannie Mae have bragged that they are in the “American Dream Business.” If that is the case, the American Dream has just gone bust. In many respects, it is the beginning of the end although the U.S. Treasury wants to paint the idea of a new beginning.

The process ends a 70-year experiment that began as an attempt to get a struggling nation back on its feet after World War II, ending in arguably the largest nationalization in global history. Fannie Mae and Freddie Mac have been forever tainted by the mortgage meltdown and securitized loans.

Essentially, the mortgage twins are a colossal fraud full of failed policy decisions and misplaced trust. Banks loan the “creditworthy” money for mortgages. Fannie and Fannie bought the loans as-is and packaged them into bundles to create bonds that external investors could purchase. All the while, the government and taxpayers are on the hook for the entire spectacle as the entire scheme for profits unraveled with the introduction of the mortgage meltdown.

For decades, the perception of these bonds has been the same as the safety of the U.S. government bonds. The mortgage twins were established with the complete backing of the federal government. What could be safer? Whether such a guarantee ever actually existed is the subject of much financial debate now. The “government-sponsored enterprises”, now failed is the result of twelve months of slow painful devaluation in the mortgage market combined with the idea of government guarantees that couldn’t solve the problem of worthless securitized bonds and suffering confidence.

mad lady liberty

mad lady liberty

The disingeniunity of the government and the mortgage twins was so large and the undercapitalization so pronounced, that investors bailed out in large quantities. That reality is also a reflection of the deceptive state of mind of the U.S. federal government. The federal government is no longer based in any kind of true reality where policy or money is concerned. They have lost their way and their collective minds, hopelessly addicted to wishful thinking and the addiction to monetary power without the ability to back it.

The Feds were limited as to how much they could borrow to cover the mortgage twins. Now that Fannie and Freddie are nationalized, the federal government vainly hopes that full confidence will be restored so that investors can be coaxed back into the fold of business. The burden on the U.S. taxpayer is huge and the moral hazard brought about by carelessness is no smaller.

How can anyone trust an agency or body of people so corrupt or hopelessly addicted to wishful thinking. Politicians and bureaucrats are addicted to notions that have permanently altered and depressed the perception of the American Dream of owning a home.

will lawmakers wake up?

will lawmakers wake up?

Barack Obama mentioned that the bailout must somehow protect taxpayers. Republicans have made no such statement to date. Still, the truth is that taxpayer protection as a result of government oversight and abuse of regulation shows the moral and financial bankruptcy of the federal government is the worst way. They are incapable of any measure of trust or faith.

To make matter worse for Republicans, they have touted smaller government and lower taxes while promoting and acting out the opposite. The takeover of the mortgage twins implies that anything the current government order says is implicitely flawed, a mere placation of the public. John McCain and Sarah Palin are tied into that reality directly by the Bush Administration and Republican policy.

The Congress is not free from blame either and Democrats are guilty by implication as well. The struggle for power and the adoption of ideas that clearly don’t work are rarely corrected. Instead, the steamroller of Congressional law makes constant adjustments in failed policies that will somehow become miraculously repaired if lawmakers just care enough and spend more money that the nation doesn’t have from international bankers and foreign sovereign nations.

The bottom line is that American taxpayers have been greatly wounded and no placation offered by the current administration or long-term politicians have the respect of true patriots. We see the lies, the seduction and the abandonment. Government and lady liberty has become hopelessly addicted to vain thinking where money and endless promises are concerned. The nation is a laughingstock of pathetic liars, made worse by bumbling incompetence and mismanagement. The American people are muddied by corruption and slavery through ineffective and misguided leadership. ~ E. Manning

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