Fannie Mae and the current congress [Archive]

tking

6th October 2008, 08:56 AM

I have mixed feelings about this election, since both candidates are confessing Christians from two very different traditions.

However, I found this link to be interesting, considering all the rhetoric of the failed economic policies of the current administration.

http://terrysoapbox.blogspot.com/2008/09/2004-congressional-hearings.html (http://terrysoapbox.blogspot.com/2008/09/2004-congressional-hearings.html)

I cannot testify to the accuracy of this or whether it was fabricated.

Just an interesting link that might have some value while we all struggle through figuring out what happened.

I found THIS ARTICLE (http://www.newyorker.com/talk/financial/2008/07/28/080728ta_talk_surowiecki) a while ago, and it helped me to understand a bit more. It looks like, from this article, the trouble really goes all the way back to Johnson's Presidency. At least that's where the loopholes were made to begin with. I'm not sure exactly when it started snowballing, but I can definitely see why it did.

What I've been trying to find out but haven't really located anything on is whether these institutions operate like the FSA (Farm Service Agency) formerly known as the FmHA (Farmer's Home Administration). The reason I wondered is because we used to be able to borrow money every year for our operating expenses, but then about 15 years ago (somewhere in that area, maybe a little less), we were denied the loans because...get this...we paid them off every year. The only way to continue getting loans through them was if we didn't pay them off and just continued to "need" money yearly. We personally knew some farmers who deliberately bought new equipment, new vehicles (not cars, but pickups and trucks), cattle, etc., just so they would be too far in debt to pay their FSA (FmHA) loans! Responsible people, like us, were denied credit because we WERE responsible. We were forced to seek out loans from banks, and that led to our downfall because FSA has fixed, low interest, while banks have medium, variable interest. It can get ridiculous...as an example, a $12,000 annual loan payment results in less than $2,000 going on the principal while the remainder goes for interest at the bank. A bit of an extreme in the opposite direction than FSA. Now consider how this would work if everyone whose mortgages were held by the Fs continued not to pay while the Fs did have to pay back their own lenders (as the FSA does)...how long would they be able to stay afloat?

I don't know if the mortgages held by Freddie and Fannie are anything like that, but if they are, I'm surprised this disaster didn't happen much sooner. The reason I've been wondering is all the talk about sub-prime loans. Theoretically that's exactly what the FSA (FmHA) was doing...rewarding those who were high risk by continuing to loan them money, which is what seems to have been happening all along with Freddie and Fannie. Not to mention the HUGE serverance packages when they ousted failing CEOs and such.

My husband and I have a theory that our eyes have been directed to the war in Iraq to avoid seeing reports on this stuff...with our current Administration hoping to slip out the door before it all blew up, leaving it in the lap of the upcoming Administration. Almost worked, too. It just reached critical mass a little earlier than expected.