Reaction to Fannie Mae-Freddie Mac bailout
Members of Congress said today that a Treasury Department plan to bolster mortgage giants Fannie Mae and Freddie Mac will be added to a huge housing bill working its way through Congress.
The two company's stocks nosedived last week on concerns that they had insufficient funds to cover bad mortgage debts. Treasury Secretary Henry Paulson announced a new plan yesterday, that would give federal officials the power to inject billions of dollars into the lenders through investments and loans, easing concerns of failure at the two companies which together underwrite nearly half of all mortgage lending in the United States.
Tampa area Congresswoman Kathy Castor said both mortgage companies are critically important backstops for the American dream in housing.
Dean Baker is co-director of the Center for Economic and Policy Research, a liberal think tank in Washington. Heâs out of the country, but released this statement today. "We had to keep Fannie and Freddie in business, but we could have done this by putting conditions on the bailout. The government uses conditions all the time when it offers help to low and moderate income people. Unemployment insurance, food stamps, and even student loans come with all sorts of conditions."
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"It is only when it comes to giving money to extremely rich people that we find it impossible to impose conditions. Again, we could have told Fannie and Freddie that no executives will get more than $2 million a year in total compensation. We could have told their shareholders that they are out of luck, because that is what is supposed to happen when you invest in a bankrupt company," Baker said. "Instead, we told the people who work as truck drivers, school teachers, and fire fighters that they will have to pay more in taxes to help some of the richest people in the country escape the consequences of their own stupidity. While kicking the poor is always fun for politicians, neither the Bush administration nor Congress are prepared to tell the very rich that they are on their own."