Obama and McCain Respond to Takeover of Fannie Mae and Freddie Mac

Well, I already talked about the Federal takeover of Fannie and Freddie, and since then, I was able to find statements from the Presidential candidates.  We’ll start with Barack Obama:

Originally, this was all we had from Obama:

I have been and will continue to monitor this situation closely, and I’ll evaluate whatever plan is put forth by this administration with the following three benchmarks:

First, any action we take must be focused not on the whims of lobbyists and special interests worried about their bonuses and hourly fees, but on whether it will strengthen our economy and help struggling homeowners who are also being hit by lost jobs, stagnant wages and spiralling costs for everything from gas to groceries.

Second, we must protect taxpayers, not bail out the shareholders and management of Fannie Mae and Freddie Mac. This is a challenging situation, and there are some community and regional banks, including those serving low-income communities, that we need to carefully address. But we must not allow government intervention to protect investors and speculators who relied on the government to reap massive profits.

Finally, we must ensure that any plan clarifies the true public and private status of our housing policies. We need to make clear that in our market system, investors must not be allowed to believe that, unlike working families, they can simply invest in a “heads they win, tails they don’t lose” context.

Then Obama’s blog somebody posted a slightly different press release, which basically said the same thing with a few differences:

Today Senator Obama released the following statement on the U.S. Treasury Plan for Fannie Mae and Freddie Mac:

Given the substantial role that Fannie Mae and Freddie Mac play in our housing system, I believe that some form of intervention is necessary to prevent a larger and deeper crisis throughout our entire economy. I will be reviewing the details of the Treasury plan and monitoring its impact to determine whether it achieves the key benchmarks I believe are necessary to address this crisis.

First, this plan must not focus on the whims of lobbyists and special interests worried about their bonuses and hourly fees, but instead on strengthening our economy and helping struggling homeowners who are also being hit by lost jobs, stagnant wages and spiraling costs of everything from gas to groceries. Second, the plan must protect taxpayers, not bail out the shareholders and management of Fannie Mae and Freddie Mac. Third, once we ride out the current crisis, the plan must move toward clarifying the true public and private status of our housing policies. In our market system, investors must not be allowed to believe that they can invest in a “heads they win, tails they don’t lose” situation.

And then we have John McCain, who made this statement on CBS’s “Face the Nation” with Bob Schieffer:

SCHIEFFER: And thank you for saying that.

Let’s talk a little bit about the big news of the day.

Sen. McCAIN: Mm-hmm.

SCHIEFFER: Both the Post and The New York Times report that the administration is preparing to put Fannie Mae and Freddie Mac, the two guarantors of mortgages, in some sort of a conservorship***(as spoken). Basically what they’re going to do is dismiss the officers, the government will take over. There’s no way you can say this is not going to cost the taxpayers billions of dollars. Do you think this is a good idea, Senator McCain?

Sen. McCAIN: I think it has to be done, Bob. I think that we’ve got to keep people in their homes. There’s got to be restructuring, there’s got to be reorganization and there’s got to be some confidence that we’ve stopped this downward spiral. It’s hard, it’s tough, but it’s also the classic example of why we need change in Washington. It’s an example of cronyism, special interest, lobbyists, a quasi-governmental organization where the executives were making hundreds of–hundred and some million dollars a year while things were going downhill, going to hell in a handbasket. This is–this is the kind of cronyism and corruption that has made people so justifiably angered. I did have a long conversation with Secretary Paulson, a man I admire and respect, and he did say that when the housing market starts back up–and it will, it will in America–then the taxpayers are going to be the first to be paid off. They’re the ones that are going to be reimbursed when the values of the homes start–hit bottom and start back up and they start getting more money back in. And that has to be a vital part of it. And again, this is a system that cries out for reform.

SCHIEFFER: You’re talking about–they’re going to have some more regulation. Is that what you’re saying? More control?

Sen. McCAIN: More regulation, more oversight, more transparency, more of everything. And frankly, a dramatic reduction in what they do. You know, they are originally designed to provide a chance for middle income people to have an affordable home loan mortgage, and it grew into this sprawling, massive bureaucracy rife with corruption, cronyism, special interests, lobbyists and a relationship with Congress. Congress passed these laws that allowed these massive loopholes to be there. And so obviously, it’s got not only to be fixed, but it’s a system. It’s an example and a symptom of a system where we’re so close to the special interests that somehow–in Washington, we’re so close that somehow the average American is totally disregarded.

SCHIEFFER: All right. Let’s take a break here.

Sen. McCAIN: Sure.

OK, so who do I agree with more?  Neither really.  Obama seems to have formed less of an opinion than McCain, and McCain seems to have pretty much taken this from the takeover.  McCain talks about “a dramatic reduction in what [Fannie and Freddie] do,” which is pretty much what the takeover plan states.

Like I said before, I don’t think that the takeover was a good idea.  I don’t think that “reduc[ing] what they do” is a good idea either.  As of now, I want the government to do their plan with the company, and get out of the companies (since they obviously won’t take my idea of doing nothing with the companies).  I see no need for the government to start dictating how much these (now formerly) PRIVATE companies do.

So, I’m kinda disappointed in McCain, but I’m not really surprised.  This follows his stance on the Economic Stimulus Act of 2008, in that he wants bailouts to help the people (at least he’s not doing it to help the company), but that government involvement is only going to hurt more people more in the long run.

Done Analyzing,

Ranting Republican
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5 Responses to “Obama and McCain Respond to Takeover of Fannie Mae and Freddie Mac”

  1. Socrates Says:

    You wrote:
    “I see no need for the government to start dictating how much these (now formerly) PRIVATE companies do.”

    If you are implying that these were completely PRIVATE companies operating in an ideal unfettered and transparent capitalist marketplace, you are either trying to snow people, or simply stupid.

    These “companies” were _created_ by the government (go look it up on wikipedia) and basically acted as middlemen – buying mortgages (giving a fixed amount to a bank, and in return getting the revenue stream from the mortgage), bundling these mortgages together, then doing the reverse: selling the bundled mortgages to investors as “mortgage backed securities”, getting a fixed amount now from the investors, who then would get the bundled revenue stream from the group of mortgages. While the federal government did not formally guarantee these loans, there has been the implicit thought that the government would not let them fail (which the government just proved was not just talk). FannieMae and FreddieMac skimmed a little part off the top of both transactions, and because the process had the implicit federal guarantee, FannieMae and FreddieMac could act like there was no risk. At some point they were allowed to become corporations with investors. The investors saw how there was little (no) risk, and a nearly guaranteed profit, so these “shareholders” encouraged FannieMae and FreddieMac to back more risky (sub-prime) loans, which lead us directly to the current problem.

    These two organizations are a long way from private.

  2. inkslwc Says:

    I was trying to say that these companies are supposed to be private, and yes I knew they were government created, and said so in my original post.

    When the government made them private (1968 for Fannie, and Freddie was directly created “private” in 1970), they were supposed to be just that, private companies. Obviously, government again overstepped its bounds, and in this case, never fully let go. Now they’re grabbing on even more to the 2 companies.

  3. Socrates Says:

    “They’re grabbing on even more to the 2 companies.”

    Come on – “grabbing on”? – you make it sound like this was a power-grab by a paternalistic government. It’s not. The slimy financial industry basically demanded the feds step in to rescue them, crying out as if the whole financial industry would fall apart if they(FannieMae and FreddieMac) failed.
    The pressure was from Wall Street. The Fed and Treasury tried mightily to stay out of it.

    Are you seriously blaming the feds? Put the blame where it ought to be – on the investors who love their middleman profits and demanded a bailout.

    Instead of saying “bad feds – grabbing on FannieMae/FreddieMac”, as a Libertarian you ought to be saying “bad investors, caveat emptor – the fed never guaranteed the securities”
    The shareholders and investors should have been keeping better track of insisting that good quality Mortgages were made.

    (But now what do you think about the creation of these companies? Should the government have ever created such entities “to provide liquidity”? A laissez-faire person would say no, but what about the incredible amount of wealth creation that they enabled over the past several decades. Not an easy call. Ideally the same companies could have sprung forth on their own without government creation, then there wouldn’t be this implicit federal backing.)

    I ran across your blog because I wanted to know where the candidates stood on this issue. It does seem like the plan is temporary, and they will let them Nov winner modify it. Wish one of Obama or McCain would say they would let them fail. That candidate would absolutely have my vote.

  4. inkslwc Says:

    But the blame does lie with the feds, because they’re giving in to the investors, the same way that the government gave in and passed the Economic Stimulus Act of 2008. It’s the investors’ fault that Freddie and Fannie wound up the way that they are now, but it’s the government’s fault for stepping in.

    It’s along the lines of Howard Dean giving in to Michigan and Florida and having their delegates seated. He did it to end the election peacefully. Was it a good move for the party? Yeah. Did I lose most any respect that I had for him? Yeah – because the only reason I ever liked him was for his attitude of not caving in to people.

    The government caved in. When a mother buys a child a candy bar because he’s throwing a fit, it’s the mother’s fault she gave in, not the child’s. I blame the government for giving in.

  5. Dina Elks Says:

    I like to think that we will find a way. America tends to have a way of solving even the worst problems.

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