Fannie and Freddie are more complicated than that
This article was written in response to â€śHow Ralph Nader learned to love Fannie and Freddieâ€ť (February 18) by Bethany McLean.
Bethany McLeanâ€™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 GSEsâ€™ shareholdersâ€™ 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 companiesâ€™ recovery. In the Treasury Departmentâ€™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.