Opinion

The Great Debate

from Bethany McLean:

How Ralph Nader learned to love Fannie and Freddie

Corrects story issued February 18 in third-to-last paragraph regarding efforts to contact Ralph  Nader.

“It is time for [government-sponsored enterprises] to give up ties to the federal government that have made them poster children for corporate welfare. Most of all, Congress needs to look more to the protection of the taxpayers and less to the hyperbole of the GSE lobbyists. –Ralph Nader, testimony before the House Committee on Banking and Financial Services, June 15, 2000

“Fannie Mae and Freddie Mac should be relisted on the NYSE and their conservatorships should, over time, be terminated. –Ralph Nader, letter to Treasury Secretary Jacob Lew, May 23, 2013

People certainly do change.

Right now, one of Ralph Nader’s key projects, Shareholder Respect, is supporting a group called Restore Fannie Mae. They are fighting for “an end to the unconstitutional conservatorship of Fannie Mae and Freddie Mac by the U.S. government.”  To that end, Nader has written an op-ed in the Wall Street Journal, “The Great Fannie and Freddie Rip-Off” and sent the above letter to Treasury Secretary Jack Lew, as well as one to the new Federal Housing Finance Authority director, Mel Watt. Nader also held a roundtable to drum up support for the cause, which largely seems to be about making sure shareholders get paid--but which seems an argument for a return to the status quo.

For most of their existence, Fannie and Freddie have been controversial.  Critics argued that their gains during good years would go to shareholders and executives, while taxpayers would be saddled with any losses, thanks to an implicit government guarantee. That’s indeed what happened during the 2008 economic crisis.

Helping America’s renters

We shouldn’t have to sue to get Fannie Mae and Freddie Mac to follow their congressional mandate and put some of the billions they are generating into affordable housing for the millions of families who need it. But that’s what is has come to for housing advocates, who are frustrated that the Federal Housing Finance Agency (FHFA) is still refusing to fund the National Housing Trust Fund.

In 2008, before the housing market collapsed, a bipartisan promise was made to millions of working families, when President George W. Bush signed the National Housing Trust Fund into law. The fund, capitalized from the operating profits of Fannie Mae and Freddie Mac, was to be a downpayment on affordable apartments, which are desperately needed by the millions of Americans who rent.

Yet when Fannie Mae and Freddie Mac crashed along with house prices, and were put into conservatorship, the Federal Housing Finance Agency decided to delay funding the Housing Trust until the mortgage giants got back on their feet. For nearly five years, the promise Congress made to America’s renters has remained unfulfilled.

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