jteamaz's Blog

This past Sunday, you and I, the American Taxpayer bought a huge financial company by the name of Fannie Mae, the largest holder of mortgages in the United States. Some were enjoying time with family, some of us were working, some may have been in church. All in all, it went somewhat unnoticed. They told us Monday, that it was just “too big to fail.” Let’s look at some interesting facts….

Do you all remember Enron? Kenneth Lay and Jeffrey Skilling were brought up on numerous charges including fraud, criminal conspiracy, and insider trading just for starters. There were plea deals, trials, convictions and fines paid by those accused. The company collapsed and you and I lost. These men had overstated Enron’s value by some $567 Million by overinflating the company’s stocks.

It has been reported that Fannie Mae’s earnings/value have been overstated by some $6.3 Billion, that’s right, with a “B.” This is where things start to get interesting. In the following 9 months after the reporting of the Enron scandal there some 3,000 articles and reports by the main stream media. In the following 9 months after the Fannie Mae report, there were about 37. Where is the media on this? Why were they, and are they so quiet? And better yet, want to know what’s happening to Franklin Raines, CEO? It goes something like this:

Mr. Raines accepted “early retirement” in December of 2004 and gets an annual goodbye kiss worth some $1.3 million a year for life, that’s around $114,000 a month. He gets free medical and dental care, and a life insurance policy worth around $5 million, that drops to $2.5 million after the age of 60. the fines imposed on him, as well as the CFO and Controller of Fannie Mae were paid by Fannie Mae's insurance policies. Raines barely got a slap on the wrist for his crimes in this, the hugest taxpayer bailout in American history. The government is telling us that it could cost us as much as $200 billion, but estimates take it as high as $1.6 trillion.....now I'm a smart guy and can put all the zeroes in the right place, but my mind has a hard time fathoming just how much $1.6 trillion dollars equates to. 

Who pays for this? We do. Poor Americans already subsidize wealthy homeowners through the home mortgage deduction. Do they need to subsidize incompetent managers who have already been paid billions? Do they need to subsidize rich guys who bought Fannie Mae bonds? Do we need to subsidize shareholders who didn’t realize that the easy money from Fannie Mae couldn't last forever? The economics are exceedingly complicated and technical, but one thing is clear, this bill is going to come due and we the taxpayers are going to have to make good on this guarantee. Shocked or outraged? It's all really nothing new.

No accountability, no responsibility, Corporate America run amok. A lot of economists long argued that the mortgage market could function fine without this government role, while warning that federal involvement carried huge risks to the taxpayer. Policymakers in Washington might now want to acknowledge they were right - and take their advice to plan an exit from the business, so that this bailout is the last one. We bailed out the airlines once already, and I heard today that the automakers are looking for a government bailout now as well. Icing on the cake? I heard a woman call in on talk radio yesterday that had purchased too much house. She now has negative equity after the fallout and is looking for a government program to make up the difference in what she now owes, "Someone should pay," she says....so much for a free market economy.

If you're not outraged, you're simply not paying attention......