ABOUT CNBC GUEST BLOG
- Roginsky: The Botax Whose Time Has Come
- Farrell: Testing Those International Waters Again
- Tamminen: Copenhagen And Beyond
- Dubai is Harsh Reminder of Prolonged Global Recovery
- Farrell: What's Different On This Black Friday
- Crescenzi: Claims Level Suggests End to Job Losses
- Schork Oil Outlook: Gas Bulls Pinning Hopes on Mother Nature
- Busch: The Debt-Interest Rate Paradox
- Busch: Markets Smell a Country Rat
- Schork Oil Outlook: Mission Impossible For The Bears?
MOST SHARED
- Timeless and Time-Tested Warren Buffett Watch Predictions
- Good Sign for the Economy: 'Greed' Makes a Comeback
- Dubai Stocks Could Fall a Further 30%: Charts
- Dubai World Set to Restructure About $26 Billion of Total Debt
- Dubai Markets Open Sharply Lower for Second Day
- What to Expect from Cyber Monday
- Treasury Threatens Banks, Not Borrowers
- Should Homeowners Be Able To Walk Away From Mortgage?
- Nov. 30: Unusual Volume Leaders
- Notre Dame Fires Charlie Weis After 5 Seasons
- Treasury Threatens Banks, Not Borrowers
- We're Approaching a Market Bubble: Portfolio Manager
- Hershey Shares: What Options Are Saying
- Nov. 30: Unusual Volume Leaders
- Why Careful Shoppers Are Great for the Box Office
- Blue Nile CEO: 'We're Having the Best Cyber Monday Ever'
- Best Online Retailers to Buy Now: Internet Analyst
- ESPN The Magazine’s Body Issue: A Financial Success
- Cyber Monday: The Last Vestige of Dotcom Hype
- China Hires Foreigners to Manage Forex Reserves
- Bank of Japan Offers Liquidity at Emergency Meeting
- Cutting Jobless Will Take Time: White House's Summers
- GE, Vivendi Agree to Value NBCU Stake at $5.8 Billion
- Manufacturing in Focus as Bulls Call for Turn in Dollar
- Euro Zone Manufacturing Grows Faster Than Forecast
- Arrest Imminent in Florida Ponzi Case: Report
- Cramer: Dubai Can’t Sink These 6 Dividend Stocks
- Treasury Threatens Banks, Not Borrowers
RSS FEED
CNBC Guest Blog
Text Size 
It wasn’t speculators; it wasn’t corporate greed; it wasn’t deregulation, nor Reaganomics. Fannie’s near-death experience came directly from her sponsor, the Federal government, which treated Fannie Mae [FNM
Loading...
()
] like its own personal honey jar, to be raided at will.
Loading up the GSE (government-sponsored enterprise) with "pinstripe patronage" hires, dumping political loyalists and failed bureaucrats (like the former FBI chief whose tenure ended with the catastrophic intelligence failure known as 9/11), and practicing identity politics vote-buying using the GSE’s balance sheets, our representatives insured the bank’s eventual collapse.
Not surprisingly, those representatives are going to use our money to resuscitate their monster.
FNMA emerged out of the alphabet soup of New Deal regulatory agencies created during the 1930s under FDR. Desperate for cash, LBJ sold it to the public in 1968, creating what we now call Fannie Mae.
The Feds sold it but never really relinquished complete control of, or liabilities from, the entity. Fannie became a genetic splice of public and private -- merging the transparency of high finance with the efficiency of government -- a place to park political friends looking for work, and an instrument with which to engage in vote buying and social engineering.
Fannie, despite not being a direct mortgage lender, played her role well as midwife to the subprime mortgage bubble and the crisis that came from it. Regulators encouraged banks to discard traditional lending standards, which require a thorough credit history or a steady paycheck, and opt for standards which are not "discriminatory" or culturally biased. Don’t worry, they advised, Fannie and Freddie Mac [FRE
Loading...
()
] will buy the paper.
Fannie did her part.
The internal investigation of allegations of accounting fraud -- which led to the departure of previous FNM CEO, Franklin Delano Raines, a former Clinton Administration official -- included a critique of the bank's "minority lending initiative," or MLI.
A whistle-blower in the company circulated an e-mail claiming that Fannie bought mortgages which were not financially sound, in order to bolster its minority-lending portfolio and resultantly, its political capital.
The report concluded that, indeed, Fannie had paid prices more consistent with prime mortgage values for loans that were closer to subprime in their credit characteristics. To add insult to injury, Fannie "capitalized" rather than expensed these premiums, and so doing exaggerated its earnings and the salaries of managers who received performance bonuses.
Nothing is more frustrating to me than to see this crisis laid at the door of "market failure" and thrown into the face of supply-siders like me. Fannie's not ours and she never was. From government she came; and whenever her plans fail, to government she returns.
What are other CNBC.com guest commentators saying?
________________________
 |
Data is a real-time snapshot *Data is delayed at least 15 minutes