The government has seized control of both Fannie Mae and Freddie Mac, two large home mortgage companies. Fannie Mae, also known as the Federal National Mortgage Association, and Freddie Mac, also known as the Federal Home Loan Mortgage Corporation, were created in 1938 and 1970 respectively.
Fannie Mae was created to boost the home mortgage market by providing additional funds to the housing industry and Freddie Mac was created to offer a little bit of good old American competition. Although Freddie Mac began as a privatized entity, Fannie Mae wasn’t privatized until 1968.
Together, these two huge mortgage giants held almost half of the home mortgages in America. Specifically, Fannie Mae and Freddie Mac either owned or guaranteed these mortgages. Unfortunately, while this governmental action might have bailed out these two groups, it creates a few governmental crisis issues.
In particular, this type of action by the US government is out of character. The stomping ground hasn’t been trodden before now and the repercussions are yet to be seen. It remains to be seen just how successful this move by the government actually will be. Has it been worth the risk? Are US taxpayers ready to deal with the government bailing out the big guys? The baby boomers watch in dreaded anticipation as to whether or not their social security benefits will remain in tact or not. The rest of America’s tax paying citizens hold their breath in anticipation of the next move by the government.
Isn’t United States government risking their credibility by acting so brashly? Aren’t America’s politician’s playing fast and loose with the tax payers’ money, even against the wishes of some of these same citizens? With the economy in such a sad state, isn’t the government putting too many eggs into the basket of redemption simply on a whim and a hope?
This calculated risk might prove successful, but there aren’t any guarantees in life except for the guarantee that American citizens are going to continue to pay more and more taxes to pay for someone else’s mistakes. This rather seems like the teacher punishing the entire class for the sake of the few. No wonder Americans are looking for a change in the way that their government operates. The question is whether or not they sanction government take overs and bailouts using taxpayer money.
Should the government’s involvement fail to resolve the current financial crisis issues, especially where Fannie Mae and Freddie Mac are concerned, confidence in the United States government will sustain damage. Part of the crisis issue with these two entities developed due to the contrary nature of the competition between the two. With a primary goal of trying to provide affordable housing, these two agencies still needed to keep an eye on maximizing profits. The constant tug and pull is now in the responsible hands of the government. Having said that, no further decisions about the viability of Fannie Mae and Freddie Mac re-establishing themselves as privatized entities or remaining public in nature will be made until the next President has taken office.