Conservatives talk about how great America’s “free market” is, while those on the political left are critical of the “free market’s excesses.”
What are they talking about?
We have nothing even closely resembling a “free market” in the United States, and the latest news surrounding Fannie Mae, Freddie Mac, and the Federal Reserve underscores that point.
People are generally confused about Fannie and Freddie: Just what or who are they? Well, let’s start with Fannie: Fannie Mae is the nickname given to the Federal National Mortgage Association (FNMA), an agency created four years after the Federal Housing Administration (FHA), which was one of FDR’s New Deal programs. The FHA, born in 1934, sought to “standardize” mortgages by insuring loans that conformed to government guidelines. The FNMA (Fannie Mae) would then buy these mortgages from the originators and pool them into marketable securities – i.e. financial assets that could be bought and sold by investors. An FNMA security might contain 100 mortgages, for example, and that way, if five of those mortgages failed, investors would only lose out on 5% of their investment. In this way, the government sought to lower the “credit risk” premium of mortgages and make homeownership more affordable to average Americans.
Sounds good, right? Well, there’s always a catch. But first, let’s continue with Freddie Mac.
In 1970, the government gave Fannie Mae the authority to purchase and securitize any mortgage – not just those that adhered to FHA guidelines – and created the Federal Home Loan Mortgage Corporation (FHLMC – “Freddie Mac”) to do Fannie’s old job. Now the government had it’s hands in virtually every kind of mortgage imaginable – though exactly where this power was enumerated in the Constitution is unclear.
Of course, Fannie and Freddie aren’t truly government agencies. In rejecting socialism, the government opted for fascism: government partnership with business. Fannie and Freddie are “privately owned” publicly traded stocks on the New York Stock Exchange, so their profits are privatized…but their losses are always socialized.
Since the mortgage meltdown – created by the Federal Reserve’s inflationist monetary policies – Fannie and Freddie’s stocks have been in the toilet. Over the past couple of weeks, each of the firms has lost billions in market capitalization. On July 10, Fannie closed at $13.20 and Freddie at $8 – the 52-week highs for the stocks are $70.57 and $67.20, respectively. During the next day’s trading, Fannie and Freddie hit session lows of $6.68 and $3.89.
And then the Fed intervened.
Chairman Bernanke announced that the Fed would stand by to bail out the firms, and the stocks – down as much as 40% for the day – rebounded, closing at $10.25 and $7.75, respectively.
Think this isn’t a big deal? Consider this: The swing from $6.68 to $10.25 for Fannie Mae represented a change in value worth nearly $3.5 billion, and Freddie’s swing from $3.89 to $7.75 was worth $2.5 billion. In all, $6 billion changed hands on Friday, all based on a few words from the Fed chairman. The investors who threw in the towel, recognizing that, in a free economy, Fannie and Freddie would be done-for, were suckers. Those who stepped in to buy the stocks at that point, confident that the government would intervene, profited by billions.
And they call this a “free” market?
Just imagine if some investors might have had some advance knowledge that Bernanke would make those comments.
Related posts:
Blogs RSS feeds [
I HAD A DREAM
It is no secret that political affiliation, financial practices, race issues and religious beliefs have so deeply divided America that “United States of America” seems at times to be nothing more than an advertising slogan to attract investors and cheap labor from abroad.
To bridge this ever widening divide I HAD A DREAM: The people motivate politicians to do what is best for America, so long as political process is the means for change.
Obviously every level of the political spectrum -Liberal, Moderate and Conservative Democrats, Republicans and Independents (NINE parties) has something to contribute to what could be best for America. I HAD A DREAM: The politicians put aside party divisions, cross the aisle and determine TOGETHER, in an ordered, expeditious, civil and transparent manner, what is best for America.
Despite the obviously questionable “efforts” by the Obama Administration, the Wall Street Weasels are not disclosing T.A.R.P. funds useage; not lending funds sufficient to revive the national economy; not significantly helping ordinary citizens restructure their mortgage debt (even while a large portion were/are “LENDER-liar loans”).
One doesn’t need to be smarter than a fifth-grader to know the home foreclosure epidemic by the Wall Street Weasels coupled with their restrictive lending practices (hoarding capital for stakeholders, foreign investors and executives) has ruined America.
Every member of every level of government in America knows who is responsible for the greed fueled foreclosure disaster which has ruined the lives of too many Americans: They know but won’t act.
I HAD A DREAM: The race haters and hated together will try motivate politicians. The bible bangers leave their religious zeal in their churches and join in to try motivating politicians to achieve what is best for America.
Perhaps working together to achieve a common goal will help eliminate or at least reduce racial hatred and religious intolerance which along with political affiliation, and its ensuing confrontation, animosity and hatred, destroys America.
For starters, a pair like Rachael Maddow and Glenn Beck could meet in my home for a televised discussion (moderated by me) about what could be best for America? Unless continuing their daily spew for personal profit is more important?
Rather than resorting to something violent or bizarre, the MOTIVATION of the politicians can best be achieved by a simple economic boycott.
President Obama, his banker-buddies Larry Summers & Tim Geithner, Congressional Leaders and the K Street Kreeps know that what is best for America is to STOP the Foreclosure Epidemic, capital hording and non-disclosure of T.A.R.P. fund use by the Wall Street Weasels– N O W. NO DREAM HERE.
1. Bankers LEND to American Citizens – 2. Bankers CREATE conditions causing borrowers to LOSE their income – 3. When Borrowers cannot make payments (see 2. above) Bankers FORECLOSE –
4. Bankers sell the foreclosed collateral and pay themselves BONUSES.
AND BERNIE MADOFF IS A CROOK?
As there are none to rid us of these thieving bankers, take your money out of Bank of America, CitiBank, Wells Fargo and J P Morgan Chase Bank (Bernie Madoff’s former Chase Bank Account Number was 140081703): They knew but didn’t act.
Dave Henrie, Founder of CITIZEN-SUCKERS OF AMERICA (Vote & your membership is automatic)
4607 E. Lewis Avenue Phoenix, AZ 85008 602.317.5808 dhenrie@cox.net
7 January 2010