The Big Hullaballoo Part 5: Getting Groped by Guys With Stupid Names

Then there's Fannie Mae and Freddie Mac.

A big news item from -- was it last week? -- was that they were being taken over by the government. But who the hell are they, and what did they do? All I knew as of two weeks ago was that their names sounded eerily similar to "Sallie Mae," the student loan racket that owns the rest of my life.

So here is what Freddie's website says:

Freddie Mac conducts its business primarily by buying mortgages from lenders, packaging the mortgages into securities and selling the securities – guaranteed by Freddie Mac – to investors.

So, if the understanding of the Big Chain of Stupid that we learned about in part 2 of this series is correct, Freddie Mac played a massive enabling role: Paying lenders for their mortgages, thereby encouraging them to do more and more mortgages to more and more people.

What else is true about Freddie Mac? It was a private corporation, though chartered by the federal government. Its mission and its function were the same as Fannie Mae, though the latter was created much earlier, under the New Deal.

So what the hell happened? The Washington Post has a pretty good overview. The gist is that Freddie Mac and Fannie Mae -- private companies, remember -- had special rules created for them, just like those other giant companies that failed.

Where banks that held $100 could spend $90 buying mortgage loans, Fannie Mae and Freddie Mac could spend $97.50 buying loans.

Also, they were subject to very little in the way of regulation. And what was the justification?

Barney Frank, a Massachusetts Democrat who said the companies served a public purpose. They were in the business of lowering the price of mortgage loans.

And

The Clinton administration wanted to expand the share of Americans who owned homes, which had stagnated below 65 percent throughout the 1980s. Encouraging the growth of the two companies was a key part of that plan.

And

The next spring [of 2000], seeking to limit the companies' growth, Treasury official Gensler testified before Congress in favor of a bill that would have suspended the Treasury's right to buy $2.25 billion of each company's debt -- basically, a $4.5 billion lifeline for the companies.

A Fannie Mae spokesman announced that Gensler's remarks had just cost 206,000 Americans the chance to buy a home because the market now saw the companies as a riskier investment.

And of course, as I guessed before even reading about it, they were in the business of buying shady mortgages, just like the guys on Wall Street.

Fannie Mae and Freddie Mac had been losing market share to Wall Street banks, which were doing boomtown business packaging these riskier loans. The mortgage finance giants wanted a share of the profits.

So what the hell does this all mean, and how can we make sense of it?

"The Clinton administration wanted to expand homeownership." So it turned to Fannie Mae (a company founded during the Depression to expand homeownership) and Freddie Mac (founded in 1970 for the same reason) to do so.

What does homeownership mean, in this definition? It means people paying a mortgage to a lender (or rather, to whoever bought the mortgage from the guy that bought the mortgage from the guy that bought the mortgage from the guy the lender sold the mortgage t0) for--what?--30 years, give or take.

And what happens to the "homeowner" who doesn't make these payments? Why, his "home" is seized, of course.

So in what way can the "homeowner" be said to "own" his house to a greater degree than I "own" the apartment that I "rent"?

There are no functional differences. But there are differences: in semantics and in prestige.

Fannie Mae and Freddie Mac existed to facilitate the illusion of "ownership" in America. And to increase the number of people who "owned" homes.

"Owning" a home via mortgage isn't different from "renting" a home in any way except: In how the "owner" perceives himself and in how others perceive him. Fannie and Freddie increased the perception of bourgeois or rather of "middle class" status among Americans. That's all. Nothing else.

Meanwhile, the only actual increase in wealth was at the (again, privately owned) companies themselves. Fannie and Freddie made a shitheap of money making proletarians feel like bourgeoisie.

The Democratic Party loved Fannie and Freddie. They increased the illusion of inclusive capitalism that is the Democrats economic guiding principle. And Fannie and Freddie loved the Democrats in return.

And that's the other part of the new Right Wing Narrative: Fannie Mae and Freddie Mac paid off the Democrats and so the crisis is Obama's fault.

And to some extent that's true. 16 of the top 25 Congressional recipients of Fannie/Freddie PAC money were Democrats, and the top 4 are Chris Dodd, John Kerry, Barack Obama, and Hillary Clinton, in that order. But the new Right Wing Narrative ignores that the Republicans were bought by the Retardedly Named Duo as well:

In the 2006 election cycle, Fannie Mae was giving 53 percent of its total $1.3 million in contributions to Republicans, who controlled Congress at that time. This cycle, with Democrats in control, they've reversed course, giving the party 56 percent of their total $1.1 million in contributions. Similarly, Freddie Mac has given 53 percent of its $555,700 in contributions to Democrats this cycle, compared to the 44 percent it gave during 2006.

Nor is Obama's the only campaign compromised in this way.

But back to this nonsense about ownership. (I'm about to say my longest sentence ever, but I've read over it and I assure you it's grammatically correct).

Looking at all this it becomes clear that the desire to be the "owner" of the place in which one lives; the prestige that is attached to that title, "Homeowner;" the constant bombardment of messages telling Americans that to be a "Homeowner" is basically the purpose of being alive and the measure of success, achievement, adulthood, America, freedom, liberty; and the willingness on the part of politicians and businessmen to both instill -- through rhetoric, through entertainment, through advertising, through the manipulation of symbol and language -- and then exploit this desire for political ("Look how many new homeowners my Administration created!") or monetary ("Hello investor, how much will you give me for these high risk mortgages?") gain that form the ultimate cause of the problem.

And that's the end of that sentence.