A friend and colleague of mine wrote this article on his blog at www.hrodas.com. I thought it had important information and so I asked him if I could publish his post on my own blog just to make sure more people would see it.
Fannie Mae and Freddie Mac are the largest holders of mortgages in the United States holding about .3 trillion in mortgage debt. It is estimated that they cover more than half of the mortgages in this country.
Fannie Mae and Freddie Mac are called Government Sponsored Enterprises (GSEs) which makes them have an unusual status. They are chartered by the Federal government to provide backing to the mortgage market, however they are owned by public shareholders.
Both Fannie Mae & Freddie Mac have been in the news because they have been struggling with the mortgage problems that affected the entire nation. There have been talks about how to rescue them if they should falter too much. I recently saw an online poll on cnn.com where the majority of those voting were opposed to any government action to “save” Fannie and Freddie. I think those who voted that way do not realize the critical role they play in the mortgage industry and the economy as a whole. If they were to fail the results would be disastrous!
Proposals at the federal level have included increasing the amount of money that Fannie Mae and Freddie Mac can borrow from the Federal Reserve (at least temporarily), and also allowing the government to purchase equity in the companies to help stabilize them. Other internal measures relating to stock have been proposed by Freddie Mac. Anyone who opposes such measures is short sighted in my opinion. Buoying up these two companies is ESSENTIAL to our country and not just the real estate/mortgage industries.
Some call it a government bail out, others an economic necessity. Regardless of the names used or who is involved, Fannie Mae and Freddie Mac MUST be saved or we will feel negative consequences ripple across the entire nation. I believe they will be stabilized and that all will be well but the naysayers need to become more informed and back away from their criticism!