Fannie Mae and related Freddie Mac are government-sponsored companies which had been blessed with backing as a special means of helping the “poor” and minorities. It also became a political device to “overcome” so-called red-lining, where minorities allegedly could not get loans because banks unfairly turned them down for credit.
Hundreds of billions of dollars were soon involved. Influential liberal politicians had friendly execs employed, with incentives to augment the gigantic volume of systemic mortgage growth and guarantees.
Over the years many observers noted the accumulated danger but the ensconced Congressional influence, exemplified by representative Barney Frank, pooh-poohed any attempt at reducing the growing risks to the entire mortgage system.
We know now about the subprime debacle as the banks attempted to cope with the toxic assets that resulted from being fed Fannie Mae and Freddie Mac fare. Blame has been placed on the shoulders of bankers by the politicians who were actually responsible.
We get more of the same, regulation with Representative’s Frank’s name attached to it: the Dodd-Frank Act. You can expect more of the same fiasco resulting unless cooler heads prevail in correcting that bit of legislation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)
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