AlterNet: Is the Bush Administration Trying to Take Down Fannie Mae?

Is the Bush Administration Trying to Take Down Fannie Mae?

By Scott Thill, AlterNet. Posted January 28, 2008.



The government-backed lender is embroiled in a murky battle.




It all came back to Friedman's single-minded message: Everything went wrong with the New Deal. That's when so many countries "including my own, got off on the wrong track" … Friedman's war on the "welfare state" and "big government" held out the promise of a new font of rapid riches -- only this time, rather than conquering new territory, the state itself would be the new frontier, its public services and assets auctioned off.

--Naomi Klein, The Shock Doctrine


"I love my grandfather," CNN chatterhead Glenn Beck complained on his eponymous show, "but I just want to slap him across the face for liking FDR. I think that was one evil son of a bitch."

Beck's complaint was echoed by his guest for the segment, supply-side economist Stephen Moore, one-time president of the Club for Growth, fellow at think tanks like the Cato Institute and Heritage Foundation, author of Bullish on Bush and now a Rupert Murdoch employee on the Wall Street Journal's editorial board. Together, they tag-teamed the history books so hard on Roosevelt and the New Deal that one could have been forgiven for forgetting that the four-time president's policies not only carried America through the Great Depression, but defeated both Hitler and Mussolini to score a geopolitical hat trick. In Beck and Moore's rhetorical attacks, FDR comes out looking like the very fascists he defeated, one who actually lengthened the Great Depression in an attempt to "nationalize," as Beck asserted, everything in sight and screw honest, hard-working businessmen out of their deserved paydays.

Of course, Moore and Beck are not alone: Naomi Klein's stunning The Shock Doctrine, a deeply researched and scathing condemnation of Milton Friedman's free-market ideology (and ideologues), catalogs neoconservative attempts over the last several decades to unwind everything FDR's New Deal has accomplished. Taken together, the attacks on FDR share one major goal: To privatize what is left of the New Deal and undermine its programs to help the poor and unlucky of the United States navigate their way into the middle class.

The Federal National Mortgage Association (FNMA), more commonly known by its portmanteau nickname Fannie Mae, is one such government entity created by the New Deal, initially to inject liquidity -- or cold, hard cash -- into the mortgage market. That is, until 1968, when it was converted into a private corporation that ceased to guarantee loans made by the government. Since then, it has existed in a nebulous state otherwise known as a government-sponsored entity (GSE), like its smaller GSE-in-arms Freddie Mac, which also buys and pools loans on the secondary market to package them into mortgage-backed securities for sale to investors on the open market. Even though Fannie and Freddie receive no direct funding or backing by the government, the loans that they securitize have the implicit support of the U.S. government behind them, thereby making it easier to land favorable lending rates, buy prices and what passes for financial security in the capital and mortgage markets. .....(more)

The complete piece is at: http://www.alternet.org/workplace/74584/

Fannie's accounting troubles are being blamed on Franklin Raines, the previous CEO, when instead much of the blame should go to his predecessor Larry Small, the jerk who almost ruined the Smithsonian before being forced out last year. Small tends to grab everything for himself while screwing up the priorities and mission of whatever he's in charge of, in my opinion. I don't know his party affiliation, though.

Raines' replacement at Fannie, Dan Mudd, is a Republican and is doing his utmost to run it into the ground. Last year they offered early retirement buyouts to longtime employees over age 50. Many people jumped at the chance to leave. Now they're getting ready to lay off hundreds more.

A lot of those who took early retirement are being replaced either with low-paid Indians here on special visas, or expensive consultants. A close friend who took the early buyout had to be replaced by 2 $300-an-hour consultants. I can't see how Fannie saved any money by buying him out. Conversely, the quality of skills among the most recent insourcees has deteriorated considerably, according to my friend.

Over the past decade or so Fannie has been replacing skilled American employees with low-paid consultants from India --people brought here on H1-B visas under the false claim that there aren't enough skilled Americans to fill those jobs. This of course is baloney -- witness all the unemployed information technology workers who've been forced to take retail jobs in recent years. Fannie's IT department in Herndon, VA is called Little Bombay. I am not knocking Indians, only saying their importation is unfair to American IT professionals who have invested tens of thousands of dollars in their college educations, yet are out of work.

Fannie is a mess. My friend and his friends are thankful they jumped ship before it inevitably sinks.

I will certainly read this. I need to get Klein's book too.