Fannie and Freddie: the dirty dance goes on 0

Lending to borrowers who could not afford to buy homes was the root cause of the economic collapse which has plunged America into debt for generations to come.

Lending to borrowers who cannot afford to buy homes continues as before under the Obama administration.

Leading the dance of corruption is Fannie Mae and Freddie Mac.

The lords of the dance are Barney Frank and Chris Dodd.

The leader of the band is Pay Czar Kenneth Feinberg.

Obama calls the tune.

Today at Townhall, Bruce Bialosky writes this about it:

[Fannie Mae and Freddie Mac], which together own or guarantee over one half of home mortgages, and which had previously been injected with a $111 billion bailout, received an unexpected Christmas present from the Obama Administration: an executive order, issued in the dark of the night … The Treasury announced they were eliminating the $400 billion limit available to these two entities – in essence giving them license to fritter away as much money as they want while the American people (and their grandchildren) pick up the tab…

The story gets even better. The top executives are in line to receive $6 million compensation packages for 2009. Apparently, the fact that Fannie Mae lost $56.9 billion and Freddie Mac has lost $14.1 billion in the first 9 months of 2009 did not stop the Obama Administration from approving these payments. The Treasury claims that the compensation meets the guidelines set out by Kenneth Feinberg, the Pay Czar; however, it appears that the minimum salaries of $900,000 far exceed the $500,000 limit that Feinberg had previously established.

Compensation of Fannie and Freddie executives has been suspicious for a long time. Typically, executives would be given huge pay packages, and then funnel some of the money back to their favorite politicians to impede the oversight process. Franklin Raines and James A. Johnson, two directors who received enormous sums of money, ran Fannie Mae into the ground only to be rewarded by the Obama Administration until political pressure forced them into private life.

Skepticism abounds as to why the Obama Administration would make such a move when we already have a $289 billion commitment for additional funding to underwrite losses from the twin entities. Treasury Secretary Geithner claimed that they just wanted to stabilize the mortgage market, but, if this was of such great importance and urgency, why was it done so secretively?

What seems to be missing is major reform of the lending practices. There’s no evidence that they’ve become more vigilant in their loan procedures, or more attentive to the credit-worthiness of the borrowers. In fact, it seems pretty clear that they have resumed their lending habits of old.

Proportional fault has never been placed on Fannie Mae and Freddie Mac for the subprime loan crisis.

Because these entities have been protected by Barney Frank in the House and Christopher Dodd in the Senate, the two lenders have escaped the kind of brutal public scrutiny visited upon banks and other lenders. While bankers have been on the hot seat and skewered by late night comedians, the people who run these behemoths have escaped unfazed.