Talk:Freddie Mac/Archives/2012

Context

This type of entity does not exist in other countries (well certasinly not the UK). It would be helpful if someone could explain the purpose of its creation is the theory behind its operation. simonthebold

Simon, the Federal Home Loan Mortgage Association was formed by Congress (the US Government) during the Great Depression to provide a market for home mortgages. At the time, private lenders were not making home mortgages, so the US government stepped in and created Fannie Mae to purchase mortgages and essentially provide a market so that people would be able to obtain mortgages. Fannie is a corporation created/chartered by an act of congress. Its competitor, Freddie Mac (Federal Home Loan Mortgage Corporation) was formed much later by congress as another GSE, the theory being that Fannie needed a competitor. The "theory behind their operations" is that they issue securities which are purchased by the public. They use the money they receive from the sale of these securities to purchase mortgage loans from selected mortgage sellers.

Once the country emerged from the Great Depression and WWII, private lenders began making home mortgages. By say the mid-1990's there was a "robust" private market for home mortgages. The rationale for the GSE's continued existance evaporated. In the 1970's both entities had been "spun off"/sold by LBJ (allegedly to pay for the Vietnam War) and became publicly owned corporations. The advantages granted them in their charters should have been stripped away when they became publicly owned. One major advantage: Under their charters, they are not subject to any US securities laws, so essentially they were allowed to run amok without any meaningful regulation by the SEC or the OCC or any other governmental financial regulator. A toothless and underfunded regulator (OFHEO) was created to "oversee" these monsters. Both entities were disasters waiting to happen. FrancisDane (talk) 12:31, 9 May 2011 (UTC)

Image:Fre.gif

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Financial Scandal

The section on Freddie Mae's fraud was (is) short and full of soft soap. I have added some substance and footnotes. Paul, in Saudi 07:45, 7 September 2007 (UTC) The whole article is woefully inadequate on this subject and needs to be entirely re-written. ```` —Preceding unsigned comment added by FrancisDane (talk • contribs) 12:33, 9 May 2011 (UTC)

share price gyrations

Are we going to add some information about the July 2008 share price gyrations? Pierre.cardoone (talk) 03:11, 16 July 2008 (UTC)

Name

Is there a good reason this isn't at Freddie Mac? john k (talk) 20:04, 19 July 2008 (UTC)

Krugman

http://www.nytimes.com/2008/07/14/opinion/14krugman.html Relevant. Brusegadi (talk) 07:58, 13 October 2008 (UTC)

Should this page and Fannie Mae be merged?

The information on this page and the Fannie Mae page seem to apply equally to both. I think they should be merged. Darx9url (talk) 15:09, 15 October 2008 (UTC)

Freddie and Fannie are entirely separate legal entities which were vicious rivals and competitors before they were taken over by the feds. The only thing they have in common is that they were originally formed as GSE's. Maybe it would make sense to create a page devoted to the theory and practice of these two weird Congressional creations and their histories when they were still owned by savings and loan associations. FrancisDane (talk) 12:39, 9 May 2011 (UTC)

Altered sentence

I altered one sentence, deleted another, and changed a reference.

However, this regulation too met with opposition from many Democrats. Thus, Congressional Democrats repeatedly fought back Republican efforts to reform Fannie Mae and Freddie Mac.

Changed to:

However, this regulation too met with opposition from both Democrats and Republicans.

I changed the reference from World Net Daily to a more neutral Associated Press article.

My rationale is that it's POV to blame only Democrats for defeat of this legislation when Republicans had control of Congress, and could have gotten the measure passed if they wanted to. --Mujokan (talk) 07:06, 20 October 2008 (UTC)

I think the AP article "Mortgage firm arranged stealth campaign" dated 20 October 2008 clearly shows that all democrats on the Senate Banking, Housing and Urban Affairs Committee opposed further regulation in 2005. Republicans only opposed the measure after Freddie Mac hired Republican consulting firm DCI. Clearly democrats only joined in regulating Freddie Mac after the firm was failing and then could no longer justify their position. —Preceding unsigned comment added by Saicome (talk • contribs) 16:38, 20 October 2008 (UTC)

However that may be, it is still false to give the impression that only Democrats opposed the bill. --Mujokan (talk) 08:12, 18 November 2008 (UTC)

The fact of the matter is that both political parties bear the blame for this disaster. Both entities gave significant amount of money to whoever was the head of the financial services committee in Congress at the time in question. FrancisDane (talk) 12:53, 9 May 2011 (UTC)

Added sentence

For the sake of NPOV, I added the sentence. "The organizers of the Democratic National Convention have not yet submitted their filings on how much they received from Freddie Mac and Fannie Mae (the latter of which tends more to support Democratic candidates)." to the bottom of the "Government subsidies and bailout" section. The source for this is the same NY Times article that provided the info on contributions to the Republican Convention (referenced in preceding sentence). Elprussian (talk) 20:44, 20 October 2008 (UTC)

Dubious claim in "Government subsidies and bailout" section

A contributor to this section says that "John McCain received $169,000 in campaign contributions directly from lobbyists, directors and officers of Freddie Mac and Fannie Mae." This claim is backed up with a reference that provides a link to a NY Times article [The New York Times, Sep 9, 2008]. The problem is that referenced Times article does not provide or support this number. Assuming the Times article, itself, was well sourced, it just provides a listing of various contributions by lobbyists who have an association with Fannie or Freddie and some discussion of contributions to "McCain and Republican Committees." It's not possible to know what money came from Fannie or Freddie and who it went to.

Further, related to POV, there's no discussion of whether or not similar money could have gotten to Obama associates, the Obama campaign, or Obama-supporting 527s. Clearly, this issue is too "current" and politically hot to be credibly covered in Wikipedia at this time.Elprussian (talk) 22:56, 20 October 2008 (UTC)

The cited NY Times article provides a chart that lists the contributions of specific lobbyist, directors and officers of Fannie and Freddie and the amounts contributed to both the McCain and Obama campaigns. The Federal Election Commission is indicated as the source. In addition, according to §441b of the Federal Election Campaign Laws, it is illegal for Freddie/Fannie to directly contribute funds to a campaign. EdMiller (talk) 00:09, 14 November 2008 (UTC)

Thanks EdMiller for your input. There is a table, which sources the FEC (and I don't remember if I saw that before). The problem is that the contributions listed in that table, assuming the numbers are factual, are contributions given either to "McCain and Republican Committees." Thus, just as I originally said, it is not possible to know how much went to McCain. Freddie was lobbying members of it's Congressional committee pretty heavily. Isn't the limit on campaign contributions to a single candidate set at $2300? ...thus, the impracticality of your interpretation that McCain got $70,100 from one guy ought to be clear. I think the original contributor would have realized this had he/she not been caught up in the partisanship of the moment. Now that the election is over, let's try to get back on track here with a focus on the facts. 192.173.34.170 (talk) 23:15, 7 December 2008 (UTC) (Elprussian)

40 times their net worth?

Is it true than an implicit guarantee by the government that it would bail out the FMs allowed them to borrow at extremely low rates and profit from accumulating trillions of dollars of debt to acquire mortgages, and thus they were able to borrow amounts equal to forty times their net worth? Simultaneous movement (talk) 16:46, 22 October 2008 (UTC)

I have no idea where this 40 times net worth figure comes from. However, it is true that due to the implied gov't guarantee, their securities received S&P and Moody's highest ratings. FrancisDane (talk) 12:44, 9 May 2011 (UTC)

Who is the accounting firm that cooked the books?

For Enron, Arthur Andersen cooked their books and they burned for it. There is no more Anderson. Who cooked the books for Fanny and Freddie? Why aren't we hearing about them like we did about Anderson? Bluetd (talk) 14:26, 7 November 2008 (UTC)

Because noone "cooked the books"....Freddie just made unwise decisionsNrvn93 (talk) 19:48, 17 July 2009 (UTC)

"Freddie just made unwise decisions....." Total hogwash. Leland Brendsel and his co-conspirator did "cook the books" to generate a consistent 15% return on equity for years. This is a fact. FrancisDane (talk) 12:48, 9 May 2011 (UTC)

This Article Needs to be Completely Re-Written

I wanted to know the name of the accountants who helped Leland et al cook the books at Freddie, so I clicked on this Wikipedia article, thinking that this information would be in the article. Frankly, I am shocked at the low quality of this article, both from a writing standpoint and a factual standpoint. It will have to be completely re-written. I don't have the time to do it now, but I will. I was "at" Freddie for many years and know a great deal about its creation, its conversion to a publicly owned corporation, the 2003 financial scandals, etc. There's too much conflation with Fannie, for one thing. Fannie and Freddie were and are separate privately owned corporations and feirce competitors. The whole political issue of which party is to "blame" for the collapse of these entities deserves a separate article. Reading this article is close to torture to someone like me who knows Freddie inside and out. FrancisDane (talk) 13:32, 9 May 2011 (UTC)