Fannie Mae-No Politics (FNMA)

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Fannie Mae and Freddie Mac Are Making A Case For Reorganization

May 27, 2014 05:16 AM

Are the two GSE's crying wolf, or is there reason to be concerned about what they are saying? Whether there is reason for concern or not the two GSE's Fannie Mae and Freddie Mac Are Making A Case For Reorganization.

Under the present system Fannie Mae and Freddie Mac are operating under, all profits are to be given to the U.S. Treasury, since they are presently under government control. By turning over all their profits to the Treasury they are left without any money in reserve for an operating cushion to cover future loses. Fannie Mae and Freddie Mac see this as a problem, because if they do not make a profit and suffer a loss, then they will once again have to tap into taxpayer funds.

That is one way of looking at it, or the way I see it, since all profits are going to the U.S. Treasury the longer the GSE's run in the black, the more taxpayer cushion there is. So if the two GSE's suffer a loss taxpayers are basically just returning some of their past profits back to them. This is much different then the bailout of 2008 when the two GSE's went into conservatorship, and every penny came from taxpayers.

My gut feeling is Fannie Mae's and Freddie Mac's out cry is not out of concern for the American Taxpayer, but a desire to have the government shackles they have been under for the past six years to be losen, and regain more control over how they operate. I have very little doubt Fannie Mae and Freddie executives are looking at the billions of dollars they have recently been pumping back into the U.S. Treasury, and saying to themselves, why should we be giving the Treasury all this money when we could be cutting ourselves big fat year end bonuses like we use to.

In any case I am in the camp of those who want to return Fannie Mae and Freddie Mac back to the private sector, but if we do, it should be done with a warning. If they go back to their old ways of losing money, there will not be another bailout.

Prior to 2008 the two GSE's were rewarding their executives millions of dollars in bonuses even though they were running in the red. This can not be allowed to happen again, and if it does then the two GSE's should be left to fail, and these executives sent to the unemployment line.

So are the two GSE's crying wolf, or is there reason to be concerned about what they are saying? You decide. But whether there is reason for concern or not, Fannie Mae and Freddie Mac Are Making A Case For Reorganization. I for one hope it happens, as long as it is made clear there will not be any more bailouts if they fail again.


http://activerain.trulia.com/blogsview/4404660/fannie-mae-and-freddie-mac-are-making-a-case-for-reorganization