We didn't break Fannie Mae and Freddie Mac, but we own them. Taxpayers have already paid $112 billion to the two entities. Now we may be doubling-down on that bet. According to the New York Times, shortly before Christmas the Obama administration,
"quietly disclosed that it had, in effect, given the companies a blank check by making their federal credit line unlimited; the ceiling had been $400 billion."
But, what are we getting for our billion dollar investment?
Wall Street, K Street, and our leaders in Washington tell us that helping Fannie Mae and Freddie Mac is essential to helping the US housing market recover. But, it doesn't appear that Fannie Mae or Freddie Mac are necessarily committed to that goal. They are, instead, pretending like it is still 2005 and housing prices will never fall.
Rather than forgive some of the principal balance of homeowners who are facing foreclosure, Fannie Mae and Freddie Mac both expressly prohibit their mortgage loan servicers from lifting some of the burden from underwater homeowners.
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