Exceeding strange that Republican majorities in the U. S. Congress had neither time nor vision to undo all this Carter/Clinton "liberal social engineering". Ok, back to Ponzi schemes and "apres moi, le deluge".
jack
You got it right. FDR came up with Fannie Mae in 1938, and in retrospect it was a good thing at its inception. One of the problems contributing to the Great Depression was lack of liquidity. There were no 30-year mortgages; banks paired their loans to their deposits. No one was signing up to deposit $$$ for 30 years. Thus when the stock market crashed and the run on banks to cover margins depleted ready cash, banks were in no position to roll over all those one to five year mortgage loans.
You need to understand this: Pre-Fannie Mae, mortgage loans were short term and not expected to be paid in full on an amortization schedule, but were partially paid down and rolled over.
Fannie Mae changed this by packaging mortgage loans with long maturities and selling the packages as a "security" to the secondary markets. Then in 1968, as a budget trick, LBJ privatized Fannie Mae and kept governmental oversight in exchange for governmental guarantees. Fannie May and Freddie Mac were regulated and audited to minimize government exposure on the guarantee, just like banks are regulated and audited by the Fed to minimize exposure under Federal Deposit Insurance. None of this was a democratic or republican issue, just good credit managing, and the system worked till the mid-1970s, again under democratic initiative. But the worm had turned...
I don't think anyone at this late date is critical of FDR's creation of Fannie Mae or LBJ's privatizing in 1968. And here I find the need to correct a prior post: I quoted the
New York Times for the proposition stated in an editorial masked as an article that "...if Fannie Mae and Freddie Mac were so important that they have to be nationalized, why weren't they regulated?" I bought this as true, but upon much looking into the subject, I find that I was wrong. The problem was not "deregulation," but these "Government Supported Entities" (GSE's) were regulated into insolvency...
First in the mid-1970s when Jimmy Carter forced through the Community Reinvestment Act of 1977, that degraded loan portfolios as a sop to inner cities where bad risk areas were red lined. This was mostly painted over with government insurance...
Until the mid-1990s under Bill Clinton's watch, when the GSE's were encouraged and then required to purchase a portfolio majority of sub-standard loans. Duh! Wasn't the result predictable?
In none of the preceding instances (1938, 1968, 1977, or 1995) were the republicans in control of the legislative branch, and in each instance a democrat was in the White House. Nevertheless, the problem did not rear its ugly head along party lines. Both sides were complicit, or asleep at the switch, as evidenced by the repeal of the Anti-Bucket-Shop law of 1907, in 2000, under Bill Clinton's watch, but with a republican majority in both houses of congress.
The real question is: Do we want these incompetent social engineers of either or both parties running our banks, brokerage firms, mortgage lenders, and automakers?
And as for the idea that republican majorities could unwind the democrats' social engineering, keep in mind that no judicial appointments have been processed of late because the democrats refuse to call any for a vote; keep in mind that thru an unprecedented trick of the rules the prospective judges have been kept in limbo by the dems not adjourning, but sending staff to keep the lights on 24/7 so there cannot be recess appointments. And the dems' filibusters hamstrung the congress repeatedly during the republican majority. But in the final analysis, I've had my fill of both political parties...and
Further EDM Sayeth Naught.
