Last week one of Fannie Mae and Freddie Mac’s major shareholders proposed dismantling the government-sponsored enterprises (GSEs) and replacing them with two new private-sector entities that would offer the same services, namely buying and guaranteeing home mortgages. Perhaps more interesting than the plan itself was the knee-jerk, statist reaction from the Obama administration, which suggests that we’re likely stuck with the status quo for a while longer.
The Treasury Department assumed a 79.9 percent stake in Fannie and Freddie when it placed the two under conservatorship in 2008, leaving stockholders with the remaining 20.1 percent. It also gave itself a 10 percent dividend on the $188 billion it invested in the entities to prop them up, to ensure it recouped the government’s money that went into the bailout.
Last year President Obama and his henchmen unilaterally altered the terms of its ownership to lay claim to every dime of profit generated by the GSEs above and beyond its dividend. Their justification for abrogating the previous arrangement? Essentially, that private shareholders are rich plutocrats who deserve nothing, whereas the administration is looking out for the people. Never mind that for years before the financial crisis, regulators steered community banks to invest in Fannie and Freddie to keep their balance sheets strong, let alone the quaint notion of the rule of law.
One Treasury official scoffed at the very idea that the housing market could exist without the federal government. The need for affordable mortgages is too important, he opined, to be settled by profit-seeking firms.
The administration’s reflexive response to privatizing a market that the government made an utter hash of . . . is to assert the importance of government intervention. While this may not qualify as newsworthy, it’s surely worthy of mockery, and makes us wonder what else the current regime has in store for us.