Fannie and Freddie are more complicated than that

By Ralph Nader
February 21, 2014

This article was written in response to “How Ralph Nader learned to love Fannie and Freddie” (February 18) by Bethany McLean.

Bethany McLean’s article deserves a number of clarifying responses.

McLean injects an air of complexity and confusion with regard to my positions on a number of separate issues in what seems to be an attempt to imply a more interesting narrative for her article than exists in reality. Some clarifications are in order:

In the 1990s and early 2000s I opposed corruption in the government-sponsored enterprises (GSEs). I was clear about my admonition of the government subsidies they received in the form of an implicit government guarantee without meeting their obligations to advance affordable housing. I was clear that their drive for profits could tempt them deeper into murky legal waters. My opposition to their management compensation packages and questionable accounting practices were made plain.

Now I am advocating for the GSEs’ shareholders’ rights. This is an issue separate from the previous transgressions and corruption.

In its conservatorship of the GSEs, the federal government has used and abused GSE shareholders. It has unfairly treated the GSEs differently than other bailed-out corporations that were equally — or more — at fault for the financial crisis.

For example, AIG and Citigroup shareholders were given a chance to share in their companies’ recovery. In the Treasury Department’s unilateral amendment of the preferred stock purchase agreements in 2012, the federal government unlawfully changed the terms of its initial investment to its own benefit.

I have long been an advocate for shareholder rights. This is not an issue of supporting Fannie Mae and Freddie Mac in their previous incarnations, but an issue of the rule of law.

There exists a more nuanced position than one of the two extremes of proposing that we either completely eliminate the GSEs or that we maintain them without any reform, warts and all.

4 comments

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what a shame this man is not in the White House taking care of business.

Posted by rikfre | Report as abusive

Yes, Ralph, Citibank and AIG (preferred) shareholders did not miss one dividend payment. Fannie and Freddie’s have missed 5 and a half years’ worth.

For one $25 share, that is about $11.35 that these shareholders will never see (not to mention compounding) which would push the amount over $15 – so, these holders have already paid and sacrificed to the benefit of the American taxpayer. It is high-time for the US government to pay an annual amount of about $2 billion to Fannie and Freddie’s (combined) preferred shareholders that had invested $34 billion.

As for the common shareholder, the reduced dividend of .05 (5 cents) per quarter would cost the government a combined $360 million per year on Fannie’s 1.1 billion shares and Freddie’s 675 million shares.

Fannie Mae reported earnings of $7 billion in one quarter today. Freddie’s earnings are due soon. Both expect to be profitable for the foreseeable future.

We are talking about a very small bone – at most $2.5 billion from earnings that will approach $40 billion in 2014.

Thanks, Ralph for standing up for shareholders’ rights!

Posted by chrisevanston | Report as abusive

What’s 50 + 67 equal? I believe it’s 117 Right? So then the year 1967 plus 50 years would equal the year 2017 right?

And the year is now 2014 so in 3 more years the American Freedom of Information Act allows the world to view the first Photographs that must be made public of the USS Liberty Massacre where Israel ordered its Army, Navy, and Air Force to destroy our American war vessel by bombs, Torpedoes, Strafing, and Shooting the American Officers and Enlisted Men in International Sea Waters that immediately killed 37, and wounded 170 that have died and been dying from their wounds in the 1967 Israeli 3 Day War.

No Enteral Flame has ever been erected in Arlington National Cemetery for these brave dead American Soldiers, no mention of their sacrifices in any American High School History Books, no President, Senator, or Representative has shown any public display of gratitude for their courage in this conflict, all those who were there and died have been all but forgotten but in 3 years the world will come to know the truth.

President Johnson was suspected of the JFK assasination by conspiracy theorists and the conspiracy to keep quite the USS Liberty Massacre for the last 50 years came on President Johnson’s shift so is there a link between the two conspiracies with the same man involved?

Posted by 1justmyopinion | Report as abusive

No Enteral Flame has ever been erected in Arlington National Cemetery for these brave dead American Soldiers, no mention of their sacrifices in any American High School History Books, no President, Senator, or Representative has shown any public display of gratitude for their courage in this conflict, all those who were there and died have been all but forgotten but in 3 years the world will come to know the truth.

President Johnson was suspected of the JFK assasination by conspiracy theorists and the conspiracy to keep quite the USS Liberty Massacre for the last 50 years came on President Johnson’s shift so is there a link between the two conspiracies with the same man involved?

Posted by hemingwaywu | Report as abusive