[Bruce_the_vii]

It turns out Fannie Mae, the US government mortgage agency, lobbied congress for power - even providing low cost loans to elected representatives. The head, one James Johnson, personally made $100 million from the agency.

http://www.economist.com/node/21532248

Article sort of made my jaw drop. The USA government agency bribing congress, and with disastrous policy. At first they said the government was involved in low rate mortgages, it was policy, but it turns out it was promoted by Fannie Mae itself. Part of the story.

[Psudo]

Republican media has been harping on this for 3 years. It was an issue in the lead-up to the 2008 election as a tangent to the housing crisis.

[Bruce_the_vii]

You'd know better than me probably. However paragraph four made my jaw drop where it described Fanny Mae making campaign contributions and a like. To me this is corruption and the type of thing that goes on in the third world.

[Psudo]

The perspective you seem to be accepting sounds remarkably similar to one presented by Rush Limbaugh within a month of the '08 election. The feeling was that Chris Dodd and Barney Frank (and Democrats generally) bought campaign donations from Fanny Mae (and other government programs) by giving them the policy they wanted. These politicians made sure these policies increased the number of people necessary to maintain the programs in order to put more voters and contributors under the influence of this buy-loyalty scheme, and the Fanny Mae (and other government program) bailouts and the "too big to fail" justification were misdirection to distract from the direct funding of a piece of their political machine with taxpayer dollars.

I felt about Rush's analysis a little like the article's author did about the book, "In hammering home its message, the book feels a little one-sided." That is, substantively correct but hyperbolic in presentation. I also found it rather hypocritical to denounce the Fanny Mae bailout in such harsh terms while supporting McCain for President, since McCain supported that bailout. But still, it's remarkable to see an issue remain widely unknown outside of the conservative devout until bashing Wall Street and Democrats became a fad of the left (by way of the OWS movement).

I conclude with a quote from the article: "[In] a comparison of America’s mortgage system with those of other countries. Few have anything like the same level of state support, yet many have comparable levels of home ownership and housing affordability."

[sandorski]

Name any major US Bank and they have essentially done the same. Doesn't excuse it, but the problem is rampant and has corrupted the system.

[Bruce_the_vii]

If I had the time I would read a book on the meltdown but from reading articles it strikes me as incredible that government agencies would lobby the government. I understand it's pretty dangerous for the banks to do the same thing. Mostly I can't get over that something as simple as mortgages was allowed to become so misunderstood, like their price doesn't go up and down.

[andyt]

Bruce_the_vii wrote:

It turns out Fannie Mae, the US government mortgage agency, lobbied congress for power - even providing low cost loans to elected representatives. The head, one James Johnson, personally made $100 million from the agency.

http://www.economist.com/node/21532248

Article sort of made my jaw drop. The USA government agency bribing congress, and with disastrous policy. At first they said the government was involved in low rate mortgages, it was policy, but it turns out it was promoted by Fannie Mae itself. Part of the story.

Fannie Mae was traded on the stock exchange - hardly a US govt agency. In 2008,

Quote:

The US government today announced the biggest financial bailout in the country's history as it took troubled mortgage giants Freddie Mac and Fannie Mae into temporary public ownership to save them from collapse

[Bruce_the_vii]

All this stuff requires under degree education in economics. I did read "Banks, Money and the Financial System" in my spare time but it just scratches surface of the topic. CKA is actually helpful on the topic, some people have more information on it.

[Psudo]

andyt wrote:

Fannie Mae was traded on the stock exchange - hardly a US govt agency.

Fannie Mae's website wrote:

Fannie Mae is a government-sponsored enterprise chartered by Congress

There is technically a difference between a government-sponsored enterprise and an independent government agency, but they are both types of government entities. Like the Federal Reserve or Int-Q-Tel, Fannie Mae has private and public elements.

[andyt]

The govt took Fannie Mae over in 2008 as part of the bailout.

Quote:

The GSE business model faces inherent conflicts due its combination of government mission and private ownership. According to the American Enterprise Institute, a conservative think-tank: "The government mission required them to keep mortgage interest rates low and to increase their support for affordable housing. Their shareholder ownership, however, required them to fight increases in their capital requirements and regulation that would raise their costs and reduce their risk-taking and profitability.

That's what fear of socialism will get you. As usual, Canada gets it right:

Quote:

Canada Mortgage and Housing Corporation (CMHC) is Canada’s national housing agency. Established as a government-owned corporation in 1946 to address Canada’s post-war housing shortage, the agency has grown into a major national institution. CMHC is Canada’s premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research.

[Psudo]

Andyt, why do you so rarely include links to your sources?

Your own quote says "combination of government mission and private ownership." It was privately owned, but government-created, government-backed, and government-directed. It is a mix of private and public elements, as I said, and never operated on a level playing field with truly private organizations. In 2008, the mix was altered to include more public elements, but there were some public elements all along.

Time Magazine, in 2008, wrote:

President Franklin D. Roosevelt and Congress created Fannie Mae in 1938
[...]
Fannie Mae grew so large over the years that in 1968 [...] President Lyndon Johnson took Fannie Mae's debt portfolio off the government balance sheet; Fannie Mae was converted into a publicly traded company owned by investors.
[...]
loans backed by Freddie and Fannie carry an implicit government guarantee: the companies are so large that the government would never allow them to fail.
[...]
Historically, conservatives have been Fannie and Freddie's most vocal critics, arguing that the companies' ties to government give them an unfair advantage over others in the industry.

The traditional party split over management of Fannie Mae is pretty clear.

By the way, Canada's system is a simple imitation of the pre-1968 American system -- the system Democratic President Lyndon Johnson ended and President George W. Bush restored.