Treasury’s debt might lose its AAA credit grade because of heavy blows to the nation’s fiscal health from the housing mess.īecause of their size and importance to the mortgage market, it’s inconceivable that Fannie and Freddie would be allowed to fail. T is triggering worries that would have been unthinkable even a year ago - including that the U.S. He points to some analysis from LAT Market Beat columnist Tom Petruno:
UCLA business law professor Steve Bainbridge has been warning about this for years, too. And as Fannie and Freddie grew, so did the fortunes of Wall Street, which reaped rich fees from issuing debt for the two companies, as well as the mortgage and housing industries, which banked billions of dollars as the housing market boomed. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years. In Washington, Fannie and Freddie’s sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. The companies, Wall Street firms, mortgage bankers, real estate agents and Washington lawmakers have built up an unusual and mutually beneficial co-dependency, helped along by robust lobbying efforts and campaign contributions. The dominant role Fannie and Freddie play today is no accident.
FANNIE MAE FREDDIE MAC PHONE NUMBER FREE
Today they own or guarantee about half of the country’s $12 trillion in mortgage debt, so the free fall of their share prices last week amid concerns that they were undercapitalized has created chaos for Wall Street and Washington. They were not subject to the same financial standards and tax burdens as their competitors, he warned, and if they ran into trouble, an implicit government guarantee to back them up meant taxpayers would be left with the losses. Julie Creswell of the NYT notes that many have seen this coming for years.Īmong them is Jim Leach, a Republican former representative from Iowa, who began arguing two decades ago in Congress that the government-chartered mortgage companies, Fannie Mae and Freddie Mac, were unfairly insulated from the real world. Iain Dey and Dominic Rushe, writing for The Times of London, note that, “The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.” The widespread rumors of a government bailout of Fannie Mae and Freddie Mac have already had dramatic consequences, perhaps creating a self-fulfilling prophecy.