From: "P. J. Alling"
Fannie May, and Freddy Mac are government agencies, in most every way.
The US government always seems to be trying to humanize itself to hide
it's true nature...
They were originally formed as quasi-governmental agencies, actually
Government Sponsored Enterprises - kind of like the Federal Reserve
Bank, which is actually a privately owned bank, even if the President
appoints the Chairman & the board members with the "advice and consent"
of Congress.
"Fannie Mae" was created in 1938 to bail out insolvent banks by buying
up their existing mortgages, injecting cash back into the banks so they
could resume lending. Fannie Mae became a privately owned, publicly
traded company in 1968; traded on the NY Stock Exchange - NYSE: FNM.
"Freddy Mac" was created in 1970 to keep Fannie Mae from being a
monopoly. Freddie Mac was "privatized" in the vernacular of the day, in
1989 under Reaganomics; NSYE: FRE
Neither Fannie nor Freddie make mortgage loans. They buys mortgages from
banks and other lenders, pool them and re-sell the pooled mortgages as
"mortgage backed securities".
In part, the problem with Fannie & Freddie is due to a 2004 change in
government rules that allowed, NOT REQUIRED - ALLOWED, Fannie and
Freddie to buy high risk loans to be counted towards compliance with
affordable housing lending goals.
Note the date.
Although there was pressure to approve more loans in depressed urban
areas, prior to 2004 Fannie & Freddie were not permitted to buy high
risk "sub-prime" mortgages to pool in their mortgage backed securities.
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