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Understanding Freddie And Fannie: Bloated Mortgage Giants, or Just Misunderstood?

Posted September 8, 2008

Politicians of all stripes are talking about what the government should do to Fannie Mae and Freddie Mac, the two Government-Sponsored Enterprises (GSE) which hold the mortgages of half of American homeowners. As the Bush administration yesterday announced its intent to take over the mortgage giants, itís important to understand their job.

Government-Sponsored Enterprise sounds socialist. Is it?
No. Both Freddie and Fannie are traded corporations, accountable to their shareholders. A GSE combines the rapacious greed of corporations with the inefficiency and bureaucracy of government. Itís not socialism Ė itís socio-spastic.

Whatís with their stupid names?
Fannie and Freddie are based on each corporations threatening acronym - FNMA (Federal National Mortgage Association) and Federal Home Loan Corporation. Freddie and Fannie sound much more personable, and also inspire confidence in home lenders. Should the corporations be seized by the federal government, their names will be further downgraded to Fuzzy Bunny and Snuggle Puppy.

The bailout is supposed to cost taxpayers $25 Billion. Isnít that a lot?
$25 Billion is chump change Ė thatís about how much we spend in two weeks in Iraq. Or, for those keeping score at home, only half of what US automakers are asking the government for to bail them out for making giant crap cars with bad gas mileage.

What would happen if we donít bail them out?
Remember those old cartoons with the villain with the long mustache first kicking you out of your house then tying the beautiful girl to the train tracks? Pretty much that.

Do they have anything to do with those random light switches in my house that don't do anything?
Freddie is. Frannie's job is to make sure that a light bulb breaks not a day after you ran out of your last replacement. And keeping your gutters filthy.

Are you sure you arenít a socialist?

Who Would Win in a Fight? Fannie or Freddie
That question doesnít really make any sense. You see, both are corporate institutions based on carefully crafted legislation...

Youíre stalling. Just answer the question.
Fannie. Even though sheís considerably older, sheís got huge assets.



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