Public Values

Who is this troublesome 'Fannie Mae' person, anyway?

The Federal National Mortgage Association (FNMA),now privatized, began life as a US government institution.

Who is this troublesome 'Fannie Mae' person, anyway? by Robert Kuttner, Huffington Post

September 9, 2008 — In the past several days, before the US Treasury Department acted to seize Fannie Mae and Freddie Mac, several people asked me if I thought it was a good idea for the government to "nationalize" the two mortgage giants. In virtually none of the coverage of the Bush administration's latest emergency action did anyone bother to tell the backstory. Fannie Mae, nee the Federal National Mortgage Association (FNMA), began life as a government invention. It was born "nationalized" — and it worked beautifully until it was privatized.

FNMA was part of the New Deal's trinity of housing agencies — the other two being the Home Owners Loan Corporation and the FHA agencies that Roosevelt formed in order to literally create the modern mortgage system. Before the New Deal, there were no long-term, self-amortizing mortgages. The loan was due and payable at the end of the term — usually five years — and if you couldn't persuade a bank or savings-and-loan to roll it over, you lost the house. After foreclosures exploded during the Depression, Roosevelt invented a whole new system. FNMA's job was to buy approved mortgages from banks, to replenish their working capital, so that they could make more mortgages. As the biggest buyer, FNMA also maintained standards.

The system worked like a fine watch. Home-ownership rates soared. Loan standards were generous but not stupid. Nobody in the home mortgage business got filthy rich, and mortgage lenders hardly ever went broke. The government's bank insurance funds regularly turned a profit. And here's a quaint, archaic concept: It operated in the public interest. . .

Privatization vs. Public Values Frame
  Private companies take more risks, make more money / Government provides stability

Links and sources
  Nationalize Fannie Mae? It Worked Until It Was Privatized, by Robert Kuttner, Huffington Post. Posted September 9, 2008

Posted: September 11, 2008

Categories:
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  Politics
  Public services
  Voices of privatization

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