FANNIE MAE, FREDDIE MAC AND CORPORATE WELFARE - Risks to taxpayers
According to their web site,
"Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. We do not lend money directly to home buyers. Instead, we work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership."
Fannie Mae is "the country's second largest corporation, in terms of assets, and the nation's largest source of financing for home mortgages. We are one of the largest financial services corporations in the world."
"Fannie Mae stock (FNM) is actively traded on the New York Stock Exchange and other exchanges and is part of the Standard & Poor's 500 Composite Stock Price Index.
In 1938, the Federal government established Fannie Mae to expand the flow of mortgage money by creating a secondary market. Fannie Mae was authorized to buy Federal Housing Administration (FHA)-insured mortgages, thereby replenishing the supply of lendable money.
In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans."
According to their web site, "Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. By doing so, we ultimately help homeowners and renters get lower housing costs and better access to home financing."
The Subcommittee on Capital Markets, Securities and Government Sponsored Enterprises, chaired by Rep Richard H. Baker, holds oversight hearings on the Federal National Mortgage Corporation (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The committee: "..watches over the U.S. capital markets, securities and insurance industries and government-sponsored enterprises, such as Fannie Mae and Freddie Mac. It oversees the Securities and Exchange Commission as well as the self-regulatory organizations that police the securities markets."
According to the Committee "The hearings explore the potential risks posed by the enterprises to the taxpayers through their implied Government guarantee. Representatives from Fannie Mae, Freddie Mac and the Office of Federal Housing Enterprise Oversight (OFHEO) comment on reports produced by GAO, CBO, HUD, and Treasury as mandated by section 1355 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992."
The popular perception is that Fannie and Freddie have greatly increased home mortgage opportunities for Americans in general and for minority and low-to-moderate income Americans in particular.
Homehownership statistics suggest otherwise.
Risks to taxpayers
The Homeownership Question
Questions concerning homeownership
Suggested changes to enhance homeownership
Testimony before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises
For further information