Fannie and Freddie are Lurking

One thing you hear little about in the news is the Fannie Mae/Freddie Mac situation. No one, it seems, wants to even talk about the problem. The combined debt of both government backed organizations is equal to 46% of the total national debt. www.hnn.us/articles/1849.html Fannie Mae was created by FDR in 1938 after the collapse of the national housing market. LBJ privatized Fannie Mae in order to remove the debt from the national budget. Freddie Mac was added in 1970. It makes one wonder what might have happened if the government did nothing at all. Somewhere along the way, and I’m not certain when it occurred, there was a definite shift in the expectations of home buyers. Our parents and grandparents bought a house, and paid it off hoping to leave it to their children with a value that approximated what they paid for it. Today’s home buyers see their homes as an investment, one that should increase two or three times in value before the mortgage is paid and the house is left to an estate. Certainly, this was not FDR’s intention. I don’t think, however, that people are too eager to return to the “good old days.”

By Myron Gushlak