Facts on Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac have been bailed out by the US taxpaper. We don't know the costs, but we have found out some interesting details.

Did you know Fannie Mae and Freddie Mac has spent over $1 billion on Washington lobbyists over the past decade? An analysis of the corruption of power and financial coercion is needed to expose the despicable connection of money and power in Washington. A summary of the scandal is located here. Make sure you listen to the author's report. It is highly informative.

Before you read on, please read about the revolving door of politicians and lobbyists in this review of the top 50 lobbyists in Washington here.

Now some facts you should know about Fannie Mae and Freddie Mac.

1. Freddie and Fannie hold or guarantee half of all mortgages in the United States totaling $5 trillion.

2. Freddie and Fannie creates liquidity in the housing market by buying mortgage loans from banks. Often, they bundle these mortgages and sell them as mortgage backed securities.

3. Mortgage backed securities are bonds sold by investment brokers who in turn sell it to their clients. For example, if you have $100,000 to invest, need a monthly cash flow to live on, your financial advisor may suggest these bonds. In essence, your money is lent to a homeowner buying a home. The principle and interest payments a homeowner make go directly to you, less a servicing fee. Fannie Mae guarantees your payment even if the homeowner doesn't make the payment.

4. Fannie Mae is in trouble because many homeowners haven't paid their mortgage payments, and they don't have the cash reserves to make these loan guantanteed payments. Now, the Federal Government is making up the difference. In essence, the Federal Government is now responsible for the millions of defaulting mortages in this country and now owns nearly half of the homes in America.

5. How much will the Fannie/Freddie bailout cost taxpayers? Nobody knows. Some suggest it will be comparable to the Savings and Loan bailout of $150 billion. You should know that the banking industry as a whole is in serious trouble, and the step to take over Fannie/Freddie will move to other private banking institutions.

6. Why was it done? Currently, there isn't money available to make future home loans because of significant house price declines and mortgage defaults. Banks have lost billions of dollars, and will continue to lose money unless liquidity is restored to the houseing market.

The questions to ask:

Shouldn't politicians have foreseen this problem?

* How does lobbyist activities affect regulation?

* How much money is raised by the members of the Banking committee from Freddie and Fannie and their employees?

* Shouldn't Senator Tim Johnson have to answer these questions as the second highest ranking member of the Banking Committee?

* Where was Sen. Johnson when it came to Sen. Chris Dodd, the chairman of the Banking Committe, when he was the single largest beneficiary of Freddie and Fannie lobbyist money?

*Oh, and how much money has Senator Tim Johnson recieved from Freddie/Fannie and all other banking institutions he is supposed to regulate?