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Crony Capitalism will keep Fannie Mae alive

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  • Crony Capitalism will keep Fannie Mae alive

    Foxes in the Fannie Mae Hen House feasting on Tax Payer funds

    Fannie Mae Board Members are often well connected finance industry insiders feasting on tax payer funds instead of looking out for interest of the US Tax Payer. There is so much coverage of Fannie Mae today in the newspapers and the airwaves and no one examines the links between the Fannie Mae collapse and the current Board of Directors and the foxes that are feasting on the Fannie Mae carcass.

    One Fox in the Fannie Mae Hen House is Jonathan Plutzik, who joined the Board in 2009. Its hard for even a cynic like me to believe that Mr Plutzik is directly related to the person that headed up the CDO Division of Bear Stearns, the group responsible for the Bear Stearns collapse. It was the liquidation of Bearn Stearns CDOs was the beginning of the financial collapse. I was surprised to discover that Mr Plutzik is the husband of Lesley Goldwasser, who according to Businessweek Ms Goldwasser “established the CDO business at Bear Stearns and was also co-head of the Asset-Backed Securities group” until 2008. Ms Goldwasser headed the very group that assembled the CDO portfolio now on the New York Federal Reserve books and now known as Maiden Lane I. In a world full of Financial executives a person directly related to a key executive responsible for the collapse of Bear Stears was the last resort for a position on the Fannie Mae Board with a salary of $176,000.

    Another interesting Fox in the Fannie Mae Hen House is Frederick ‘Bart’ Harvey. Mr Harvey was the CEO of Enterprise Community Partners, a non-profit whose mission is to provide Low Income Mortgages with financing provided by Fannie Mae and Freddie Mac and other government programs. The very year Mr Harvey retired from is $227,000 a year position with Enterprise, he began his term on the Fannie Mae Board with a salary of $180,000. Examining Enterprise Community Partners more closely and you discover that this affordable Housing Non-profit has a for-profit subsidiary called Enterprise Investment Fund. I don't understand why an affordable housing non-profit would need a for-profit subsidiary. When you review the Board of Directors for Enterprise Community Investment (the for-profit subsidiary) you’ll discover a current Freddie Mac Vice President and two recently retired Fannie Mae Vice Presidents. So, we have Fannie Mae and Freddie Mac executives working for a Company that can only exist with of Fannie and Freddie financing.

    Crony Capitalism will keep Fannie Mae alive, there are far too many well connected individuals profiting from Fannie Mae and Freddie for either to ever be closed for business.

  • #2
    Re: Crony Capitalism will keep Fannie Mae alive

    Au contraire, BK. It's easy to underestimate the wiles of FIRE, especially the audacity of the TBTFs. Bold as a thief, I believe, is the appropriate cliche.

    The new year is not even a month old, but we may already have a contender for the very worst idea of 2011. Big banks are lobbying to take over where government-sponsored enterprises Fannie Mae and Freddie Mac left off, reports Louise Story in the New York Times. They want to be the ones to issue government guarantees going forward. This terrible proposal would essentially create a new housing policy framework just as (how about more so) toxic as it was under Fannie and Freddie.

    What precisely does Story say banks are suggesting? First, banks assume that the government will continue to stand behind most mortgages in the U.S., as it has in the past. They think this because they've said that they won't stand for anything else. They have threatened to stop originating 30-year mortgages without a government guarantee in place.

    So if the government does backstop mortgages, there just remains a question of who issues that guarantee against mortgages. In the past, Fannie and Freddie had this responsibility. We all know how that turned out.
    TBTFs would issue mortgages insured by public funds. Hmmm, sounds like a big piece of heaven for our national sociopaths.


    • #3
      Re: Crony Capitalism will keep Fannie Mae alive

      The Current system of Fannie and Freddie give Politicians a lot more Command and Control.

      There is an entire Industry of Community Development Enterprises that are supported by Division of the US Treasury. Take a look at Enterprise Community Partners - its a huge Non-profit business with Links to large Banks, GSEs, and the US Treasury.

      Complexity is a Politicians friend - its harder to track the horse trading. But, I am often wrong and I may be again.


      • #4
        Re: Crony Capitalism will keep Fannie Mae alive

        In our current form of governance, the political elite act as a conveyor of wealth to FIRE (and others), not the other way around.