This story from CNBC tells the story of Fannie Mae and Freddie Mac’s pending and proposed financial bailout. The $25 billion number is very large, no doubt, until you understand that the combined outstanding debt of Fannie Mae and Freddie Mac EXCEEDS the combined outstanding debt of the United States of America — or more than $7 trillion! Compared to that potential default, $25 billion is a small price to pay.
Fannie and Freddie were created after the Great Depression to help insure that credit for the poor and working class remained available for homeownership. On balance, Freddie and Fannie have fulfilled this promise over time. The problem today is that Fannie, Freddie and the FHA are together purchasing more than 70% of all mortgages produced in the market in the U.S. The private market has all but dried up, and this, more than anything else, is not good for America.
Stay tuned. This story is far from over.
Onward with HOPE
John Hope Bryant