Fannie and Freddie are an economic disaster for U.S. taxpayers and endanger the entire U.S. banking system but according to the Wall Street Journal Opinion page they have been a big success politically for Representative Barney Frank of Massachusetts and, apparently, that is how Washington judges success.
But the biggest payoff for Mr. Frank is the “affordable housing” trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits — as much as $500 million a year each — to a fund that politicians can then disburse to their favorite special interests.
Ah, the ever popular political slush fund.
Mr. Frank has had many accomplices from both parties in his protection of Fan and Fred. But he was and is among the most vociferous and powerful. In any other area of American life, this track record would get a man run out of town. In Washington, he’s hailed as a sage whose history of willful error will be forgotten faster than taxpayers can write a check for $200 billion.
I used to blow off the “affordable housing” angle as a partial cause of the Fannie and Freddie failure but now it seems plausible.
{ 3 comments… read them below or add one }
RE Investor 09.10.08 at 3:45 pm
And yet these two geniuses walk away with 8 million and 11 million dollar severance packages ON TOP OF their bloated salaries. Apparently one of them (don’t remember which one) had a contract clause that even compensated him for the stock options rendered worthless by the takeover. Folks, THAT is the reason we are in the mess we are in. NO ACCOUNTIBILITY. Do you think for one minute that these people that ran these companies whose wreckless risk managment caused all this, are going to feel ANY of the economic fallout of their actions? Highly doubtful, that is for the little people to bear the brunt of. Very few foreclosures in the Hamptons, Pacific Palisades, Brentwood, Beverly Hills etc. folks. Most on main street, and most working people.
I am afraid that until this kind of incompetance and malicious capitalism is curbed, we will have a very hard time building back credit markets. In reality, isn’t credit really just trust? That has been broken VERY badly, and will take a long time to earn back, especially from foreign investors who used to see America as a good investment.
RE Investor 09.10.08 at 3:49 pm
I realized I was not clear on the whom the “geniuses” I was referring to were in my previous post. I am referring to Daniel H Mudd of Fannie Mae and Richard Syron of Freddie Mac. Sorry.
Brian 09.13.08 at 11:13 am
I don’t see why they shouldn’t be prosecuted for their fleecing of the public and fraudlent management just like the executive managers at Enron, Tyco, QWest and HealthSouth. Why should they be treated differently?
And while we are prosecuting fraud at Fannie and Freddie, I think Barney Frank should be served his papers as well. That guy is a clown. He has no respect for the taxpayer and only cares about his legacy as the guy who made “housing affordable for everyone” (make that no one).
Hopefully history will record him as the person most responsible for the Housing Depression of 2008.