The Mysterious Ways Of Fannie And Freddie

The Financial Crisis Inquiry Commission has started its work with a highly publicized two-day hearing in Washington, D.C. The Commission is supposed to find out what caused the financial crisis, but it seems like they are trying to enact Hamlet without the Prince of Denmark. Among all the bankers and regulators on stage during the hearings, there was not a single representative of the government-sponsored mortgage giants, Fannie Mae and Freddie Mac, which were major causes of the housing bubble. The reason for the omission is disturbingly obvious. When Congress created the Commission they wanted a crisis narrative of greedy bankers and passive regulators. In other words, they wanted to put the blame somewhere else. Fannie Mae ( FNM – news – people ) and Freddie Mac ( FRE – news – people ) are creatures of Congress and it was Congress that pushed them to undermine underwriting standards and increase lending to low-income households while stalling reform. [Read the full article]

Fannie (FNM) issued an 8k yesterday confirming what Mike DeMarco at FHFA said Thursday regarding the Agencies’ involvement with a new program to finance home construction. Basically Fannie and Freddie (FRE) are going to be the new bankers for HFA (Housing Finance Agency). Treasury is buying the debt for this, so the taxpayers are at risk. It is not that big a deal, yet. It starts out with a modest $28b. This is a stimulus. Plain and simple. If you have any doubt whether this is intended as a stimulus consider the words of some of the big shots who put this plan together: “Supporting the work of state and local HFAs is critical to the Administration’s broader initiative to stabilize the housing market, which is helping to keep mortgage rates low and mortgage finance flowing for American households across the country,” said Treasury Secretary Tim Geithner. “We applaud the successful completion of the HFA Initiative. [Read the full article]

IT sounds like good work if you can get it, and thousands of people in corporate America do. On average, they attend 8 to 12 meetings annually. Although they are supposed to have fiduciary obligations, they often appear simply to warm their assigned seats, and to raise their hands when their leader calls for a vote. For that, they can receive as much as $640,000 a year. Who are these people? Company directors, who are typically handpicked from other companies, banks, academia and, in some cases, social directories. But underworked, overpaid corporate boards are doing serious harm to the shareholders of public companies and the economy as a whole, according to “Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions” (Free Press, $27), by John Gillespie and David Zweig. In the wake of the global economic debacle, the name of the game for authors of business books is assigning blame. [Read the full article]

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