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Fannie Mae/Freddie Mac – Looks Like I Own Part Of $5.4 Trillion In Mortgages Now.

As I am sure you are well aware of by now, the government just bailed out Fannie Mae and Freddie Mac with our tax dollars. Yep, you are now the proud part owner of $5.4 trillion in mortgages, some of which are sound and many of which are not. Over the last two years that this site has been around, the word socialism has been mentioned by commenters here like it is some kind of a biological agent – yet I don’t see many people screaming out loud about this socialistic bailout with your tax dollars. Just the other day, my post about our country needing health care reform got a lot of attention because of my “socialistic” leanings on the subject. However, in an incredibly large amount of situations, we are in fact a version of a socialistic society – everyone’s taxes provide for police, fire, EMT’s, roads, bridges, education, military, food stamps, subsidized housing, prisons, sewage, some hospitals, libraries, parks, and now $5.4 trillion in what used to be private loans. Where does the line get drawn in the sand?

I guess when it benefits the the housing market, the economy as a whole and any shareholders of the two giants who might gain something, socialism is a good thing. When it benefits children who need a hot lunch at school or a parent who needs help paying medical bills, it’s bad.

No wonder people are confused about how to feel.

I don’t know the solution, I really don’t – and have never claimed to. I am not a socialist or a capitalist; I am very much in the middle depending on the situation. But I do know that our society benefits greatly from the shared expense of all the things I listed above and many more I didn’t. I don’t want to pay for those people’s mortgages any more than the next guy – I didn’t screw up the system but yet now I have to burden the expense. We allowed the free market to create those loans and look where it got us – another $5 trillion in the hole.

So which is it? Are we a capitalistic society where everyone is on their own or are we a socialistic society? Or are we a socialistic society masquerading as capitalists? Or are we neither? All I know is that I am now the proud owner of my share of $5.4 trillion in mortgages, and for some reason, I am not feeling like a proud owner.

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Comments (28)

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  1. Miranda says:

    I rant somewhat regularly about this whole health care thing and “socialism.” Mainly because it annoys me that the word is being used to scare people into a knee-jerk reaction to universal health care. The fact of the matter is very nearly everything else in our society has been socialized — your list is a good one. We’ve even got socialized capitalism. Consider: Profitable companies (especially Big Oil and Big Ag) receive actual subsidies from taxpayers. They get a distribution of our taxpayer dollars AND they are allowed to operate on a “market forces” model of business. Even health care, to a certain extent, is already socialized. Don’t we all fall subject to the “group rate”: When someone else in our group has a serious problem, we all pay higher premiums. It’s just that insurance companies are in charge and can set the prices.

    At any rate, with all the socialism we’ve already got going on in the country, it’s rather ironic that we get all upset and concerned at the thought of socialized heath care, especially when it could be a great boon.

  2. FFB says:

    Wait, so if taxpayers now own part of the mortgages does that mean I write a portion of that off on my taxes? I might have a nice refund coming next year!

    To say we’re socialist or capitalist is a little like saying we’re democratic. We’re not democratic you know. Not in it’s true sense. And we’ve had socialist programs for a while now. We’re a blend that thrives on capitalism which allows enough revenue for us to be have socialist aspects. People like to through those words around like they are absolutes but they aren’t absolute.

    It is a strange society we live in where trillions are tossed around to corporations yet there is still so much wrong around us. Still, we can complain about this because we have a right to and that right is protected. We all just have to work to find a better solution.

  3. Fit Wallet says:

    The real irony is that the free-market and lack of proper regulation is what got us into this mess. We wouldn’t need a “socialist” corporate bailout to save the market if it weren’t for the laissez-faire approach that sunk the mortgage industry in the first place.

  4. This is now business as usual in the US. The corporations have arranged, with the complicity of the “elected” officials they’ve bought and paid for, to privatize all gains while socializing all risks and costs. It doesn’t take a blatant bailout this massive for this to happen. It’s been happening all along for the last several decades as big ag devastated environments from the Gulf of Mexico to the cattle grazing lands of the mid-West. Who’s going to bear the costs of that damage? It won’t be the corporations. It’ll be your grandchildren. Likewise with the seed giants Monsanto et al, who seized our common heritage of staple grain seeds and is now holding the world at large ransom for “their” product, which is sterile and needs to be grown with a chemical bath of toxins sold only by Monsanto. Who loses, and who gains? It’s the same story with this bailout of corporations who re-wrote the laws so that they could lend irresponsibly, while making it much more difficult for the “little people” to declare bankruptcy. How much do you think those executives have walked away with?

    Privatize the gains, socialize the costs. That’s the way things are done here now. And god bless Amuricah.

  5. Emily says:

    I was going to say exactly what Kate just said. I have been known to lament the “privatize the gains, socialize the losses” and my friends and family just nod and smile while their eyes glaze over.

    In the end, it’s about making sure above all else that big business stays big and the little guy stays down. Most of the little guys just don’t know it or want to see it that way though.

  6. Frugal Dad says:

    I don’t have the answers either, but I do know that our forefathers would be appalled at the way the “government” spends tax payer money. 200 years ago, the idea of Congress spending any public money to bail out homeowners, private industry, etc. would have been laughable.

    It was Congressman Davy Crockett who said, “We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money.” This was in response to a bill offered up to give money to a naval widow. My how times have changed!

  7. FFB says:

    Our forefathers were doing the bailing out thing from about the beginning. Alexander Hamilton proposed that the US assume debts from the individual states during the revolution. Many states were against this since their debts were expected to be paid off. In this case assumption of debt made the US stronger and helped to unite us. It also led to the agreement that would create the federal gov’t in DC.

    This isn’t a new thing. It can be done to make a country stronger. But it should be used with restraint and under the right circumstances.

  8. $10,000 in medical bills — and that’s with insurance…

    Two encounters with illness have cost David of My Two Dollars and his wife nearly $10,000 out-of-pocket so far this year, and that’s not including the $320 a month they were paying for health insurance premiums. Health care is a huge personal-finance …

  9. Shay Jansen says:

    My mind boggles to the amount of money that has been given to this “cause” by the goverment!
    I can not truley understand what you guy’s go through over there I live in Australia we are blessed with a health care system that takes care of you no matter what you finacial status (yes we have to wait and yes our hospitals can do with some major upgrades but hey it is free!) Yes we do pay for it from our taxes as well but it is a worth while cause.

    I just sit here and think of the Trillions of dollars that this company has been handed and think of all the people that don’t have homes, food, shelter, clothes on their back and the simple things like going to a doctor or having their medication subsidies without belonging to an insurance comapny, What about the schools ove there could they use that Trillion dollars given to the company? What would that money by for Everyday America my mind boggles at the thought!

  10. david says:

    I agree Shay – heaven forbid we give schools or communities money, or help people stay out of prison, or get quality health care. But as long as we help out the shareholders of private companies with public money….

  11. thinkingthing says:

    Really disgusted with this. How about Lehman Brothers, when is that one going to drop? Are we bailing out the auto industry, now, too? Are we getting a fat wad of cheap GM shares with our tax rebate checks?

    The argument is – and I don’t know why they even try to justify it to the public because we have no say in the matter – but the argument is that these bulwarks of the economy are too essential to let them fall. The argument is that if they fall, the economy will tank and everyone will pay the price.

    Funny thing is, when the economy is booming, the median citizen’s inflation-adjusted paycheck is STILL getting smaller, and only a measly percentage of Americans see their net worth take off. What a rip-off. We’re supposed to bail out these companies when they’re failing, but don’t share in the insane profiting when they’re raking in our cash? How exactly is this argument supposed to persuade us? How did the fact we were not purchasing these company’s shares lead our reps to believe that we gave a crap?

    Writing letters to reps just doesn’t seem to reach them, I get the same limp form responses back from my representatives’ staffs’ assistants’ unpaid interns time and time again. We need lobbyists like the big guys. Now that a hearty fraction of the nation is unemployed, I bet all it takes is a U-Haul truck full of sandwiches to recruit a small army of hobo lobbyists. Who’s with me on this? Hobo Lobbying Firm. Public offering will be NYSE:HLF. Universal Healthcare is first on the docket ’cause it’s the only kind our hobos are ‘gunna get. Trust me, it’s going to be gangbusters.

  12. PT says:

    What’s crazy is that our Govt actually forced these lenders to give more loans to minorities a couple of years ago. I think that’s why the Govt bailed the lenders out…they knew they’d helped create the problem. All in the name of “leveling the playing field” (socialism) …in this instance, a bipartisan effort.

    Read this essay for more on this: http://www.takimag.com/site/article/the_diversity_recession_or_how_affirmative_action_helped_cause_the_housing/

  13. David Y says:

    I’ll start out by saying that I tend to be somewhat libertartian in that I think most people can take care of themselves better than the government. But, don’t believe in ‘everyone for themselves’. We do need a good safety net when people have problems. And there are services that we do need the government for (police, schools, libraries, etc).

    As for freddie and fannie, government policies did play a part in what they did. But, so did greed and people not being quite as smart as they thought they were. I hope they are privatized. If anything criminal was done, send some folks to jail.

    Like many of the other commenters here, I am more bothered by corporate welfare. A lot of companies are using us taxpayers as their personal piggie banks. Too many companies seem to have the attitude “we’re too big to fail, so we can do whatever we want and Uncle Sam will bail us out’. Let a couple go under, maybe others will straighten out.

    Finally, we need a good housecleaning in Washington in both parties.

  14. David says:

    PT – not sure what minorities have to do with this discussion, that seems rather racist to assume that because minorities got loans, we got into this situation.

    David Y – “If anything criminal was done, send some folks to jail.” – If only that would actually happen…

  15. Erik says:

    this probably wouldn’t have happened and the housing market decline would not have received so much attention if it weren’t an election year. The foreclosures were just as big in 2007, but it gets more press now, because politicians can use it as a political platform. As a capitalist that believes in private, free market solutions, I think that this is a huge mistake to keep bailing out every large company that struggles.

    I agree with you that this is a double standard, even though I don’t support government sponsored health care. I think we’ve become a society that pay FAR too much attention on the federal government, rather than our local government. The shift should go back to our local government, because the decisions made at the local level affect us every day.

  16. yujine says:

    Hey, luckey you Americans! You are still miles away from socialism. Look at Japanese politics and their bureaucracy. The bureaucrat wishes to build something and everything. That is for themselves. Because as they retire from govenmental offices, they got their second job at the office that had been set up by themselves. What the offices for? That’s a good question. They set up offices or rather establish a corporation to take care of the maintenance of what they had built. It could be a bridge authority, highway authorities and something for everything. We call it the bureaucrats socialism. China is getting into that stage. No, they were not the socialists but the communists, remember?

  17. [...] Fannie Mae/Freddie Mac – Looks Like I Own Part Of $5.4 Trillion In Mortgages Now. @ My Two Dollars – These kinds of things for me are just one more step in the move away from capitalism to socialism. I personally don’t believe in giving the government more power and neither did our founding fathers. [...]

  18. Tim says:

    i think people get confused on the definition of socialism, capitalism, democracy, etc. they are nice buzz words, especially in election year. forget all of the isms, because it doesn’t matter what you call it.

    People need to start focusing on the actual problem, bad consumption behavior. We aren’t paying to bailout the companies. We are paying to bailout all the idiots who decided to get mortgages that they couldn’t afford and take on credit they couldn’t afford. The govt, thus the rest of us, is bailing out the idiots who are defaulting on their mortgages by taking control of F&F. The govt is bailing out the idiots under the home mortgage aid bill. Let’s make no doubt about it that the problem starts with all the idiots (i think they are probably smart, because now they aren’t having to pay since everyone else is paying for them) who signed the dotted line. Sure lenders/creditors made things alluring and tempting, sure they came up with some goofy mortgaged backed investment vehicles, but no one ever was forced into signing the dotted line for a mortgages that were used to fund the investments; no one forced into signing up for credit cards or credit lines; no one forced not to save; moreover, the lenders/creditors wouldn’t have been able to make any money off of goofy mortgage backed investments if there weren’t lots of people with bad consumption behaviors. People need to start belittling and peer pressuring all the a$$holes out there who decided to take on a mortgage they couldn’t normally afford. unfortunately, the peer pressuring and belittling was done to show how low your life was because you didn’t have all the newest gadgets and large houses. we should start registering them like we do sex offenders, although there would then be huge communities of registered idiots, because they are the ones who got us into this mess. It’s easy to blame the govt, especially during an election year, but this mortgage mess has american consumers solely to blame for their terrible consumption habits. because it’s an election year, we are getting all these bailouts to help out “the working americans” stay in their homes that they can’t afford. People need to really stop and look at what caused this mess, stop trying to interject healthcare, -isms, and everything else into the argument, because when you wipe away all the crap, you are left with all the idiots who CHOSE to buy a house they couldn’t afford.

    companies aren’t themselves greedy, the share holders demand progress. Instead of complaining about the companies, buy some shares in the companies. Stop whining, unless you are whining about all the idiots who are spending freely with your money by running up debt.

  19. David says:

    Unless all the tax money goes directly to the borrowers, we are bailing out the companies, plain and simple. I agree that it is mostly the fault of the borrowers, with some fault of the lenders, but still – who gets the benefit, really? The companies themselves, their CEO’s, and their shareholders – with my tax dollars.

    yujine – We have all that stuff too, don’t worry.

  20. Tim says:

    David, considering the nearth worthlessness of the stocks, i doubt that the shareholders are benefiting at all. surely the company itself isn’t benefiting either since they are effectively no longer in being if a bailout occurs and someone else takes control. who benefits? all the folks with mortgages, because now taxpayers are floating their mortgages for them in order to prop up the company.

  21. fathersez says:

    10 years ago, when we had the Asian Financial Crisis, we were told by the World Bank and the IMF that market forces had to prevail. Corporations fail because they have a flawed business model …blah blah blah. Our then PM told them to take a walk off a plank and did more or less what the US Government is doing now.

    Use taxpayers money for the “greater good”.

    I don’t know who is right or wrong, but no CEO or senior official of a failed and rescued company should get any payoff. Rather they should be given 20 lashes at the local market square.

  22. PT says:

    David, you sure are quick to insinuate someone is racist. A very judgemental guy you are. I take offense. The US govt made it about race when they forced lending to minorities. Yes, it was a racist move on their part, just like every other govt program that’s based on race. I’m just telling you what they did.

  23. David says:

    Sorry PT but when you bring race into an equation where it doesnt matter, its racist. “Lower-income folks” is one thing – we can come in every color. But to insinuate that “cant afford mortgages” or “lower income” = “minorities” is a racist statement. I stand by it.

  24. PT says:

    i didn’t bring race into it. the US govt did.

    “insinuate that “cant afford mortgages” or “lower income” = “minorities”” …no one is saying that in the thread above. where are you pulling this from?

    where I’m from you just don’t throw that term at people so lightly.

  25. Fit Wallet says:

    PT, when I was approved for a mortgage with Bank of America, the broker offered me a range of products, including variable rate ARMs and balloon payments. Thank goodness I had educated myself about all of this and had already heard about what happens to those teaser rates in a few years. My brother-in-law almost signed up for an ARM before his mother warned him against it. We are both white, by the way, and have excellent credit.

    These mortgages were pushed on a LOT of people, and not everyone knew what they were getting into. Others knew but jumped in anyway. Some people (of all races, in fact) borrowed way beyond their means. If you want to blame minority borrowers instead of the whole system–lenders, borrows, government deregulation–then you’re missing the big picture about what’s happening in our economy. You seem to have a narrow worldview, which is too bad.

  26. David says:

    PT, I am very sorry but I have to disagree. Its the fault of everyone who took these mortgages, not just the minorities who did, as Fit Wallet said. You said “forced lenders to give loans to minorities” (you didn’t say “forced lenders to give loans to lower-income people”) and then linked to an article about how affirmative action helped cause this crisis. You and I have always gotten along, but I have to disagree with your point on this one. I cannot, and will not, blame a this crisis on a singular group because of the color of their skin. There were plenty of people where I used to live who got foreclosed on, and they were by no stretch of the imagination “minorities”.

  27. PT says:

    @ Fit Wallet – Good for you on your loan. I never said “they” were to completely to blame. Just that a policy was partly to blame. Stop telling me what I said, please. Thanks for telling me what my world view is too. You’re right, I’m an idiot. Thanks so much for saving me, j@ck @ss.

    @ David – I never said it was strictly their fault. I’m simply saying that the Govt did this program. Please, read this (http://www.whitehouse.gov/news/releases/2002/10/20021015-7.html). That’s Bush addressing minorities, telling them how they should own more homes and telling them the specific programs that will get them there.

    At no time in this thread have I said it was their fault…strictly that a policy was part of the problem. I simply said that it happended and that Bush felt obligated to bail it out. If anything David, this should be your chance for jumping on Bush’s failed policy here. Odd you don’t seem to want to do that.

  28. david says:

    PT – Blaming Bush is too easy, I could do that for days. This crisis is everyone’s fault, no matter what race, color, sex, age, income level, etc. The thing I took issue with is when you said “What’s crazy is that our Govt actually forced these lenders to give more loans to minorities a couple of years ago” like this is all the fault of minorities. That is all. If you had said it was the fault of everyone’s, I would not have had an issue with a comment. Even thought Bush (and Clinton, for that matter) did push for more minority home ownership, that is not the reason for this crisis. It is a culmination of tons of different factors and cannot be blamed on race.

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