Fannie Mae and Freddie Mac on the mind of Congress
Written by VASS
A day after Fannie Mae reported loses of $13 billion in the first quarter of 2010, and days after Freddie Mac reported losses of $8 billion in the same period, the Senate took action. Of a sort.
Since 2008 Fannie Mae and Freddie Mac have been funded with $145 billion in taxpayer dollars. According to statements reported on this blog yesterday, there is no end in the foreseeable future of the need for more taxpayer money. Estimates range that the intermediate-term need of Fannie Mae and Freddie Mac range from $40 - $50 billion. Given these facts it is obvious that there is a problem, it is not being resolved, and that the problem will grow over time.
Thus Senate Republicans proposed to end the Government run of these insititutions. That came to a vote in the Senate, which was defeated 56-43 by Senate Democrats (including NY Senators Gillibrand and Schumer - both up for re-election). Senate Democrats voted to keep allowing Fannie Mae and Freddie Mac operating exactly as they have been, running a deficit of book values that no other corporation (if privately owned) could ever maintain and be in business.
Instead, Senate Democrats offered to study Fannie Mae and Freddie Mac. That vote passed 63-36 (including the votes of New York Senators Gillibrand and Schumer).
What exactly needs to be studied? Fannie Mae has a book value of -86.78/share, Freddie Mac is at -94.90/share. It’s very obvious that the only thing that keeps these companies in operation is the financial funding from the U.S. Government. What is not clear is why the Government allows these companies to operate in such a faulty manner without so much as a need to request additional funding. Funding is automatic, and unsustainable.
Thus there is a conclusion to be made. Senate Democrats like Senator Gillibrand and Senator Schumer are more than willing to accept funds from Wall Street for their re-election campaigns. They are more than willing to make public statements that the need for financial reform is imminent, and vital to the economy. They are more than happy to use these statements (and not mentioning the funding) as keys to their re-election efforts.
But they are not willing to cross a political line in the sand; to act on 2 critical insititutions responsible in large part for the current financial crisis and economic downfall. They are unwilling to require fiscal responsibility in the GSE’s (Fannie Mae and Freddie Mac) at the cost of over $145 billion in taxpayer funds which is growing by the day. They actively refused to make a real decision on reforming the most needy inistitutions, yet expect praise and votes for that refusal.
Maybe the concept is too political and mathematical for the Senators and those not familiar with the situation. In effect, The U.S. economy is the Titanic. We have just hit the iceberg that is the mortgage and financial crisis. The ship is being flooded by debt. But like the captain of the Titanic, Senate Democrats (Senators Gillibrand and Schumer among others) believe the ship cannot sink. They have decided to keep sailing on. They want to look at the hole in the ship, but do nothing about it.
Given that scenario, if you had the chance to vote the captain out of his position and potentially save the ship would you? In November, when Senators like Gillibrand and Schumer are seeking re-election will you give them your vote?
