Jan 20, 2010

Blaming Freddie? ”Save the drama for your momma.”



These days, there’s a lot of talk on the hill questioning the mission and status of FreddieMac, Freddie, because of the bailout.  To me, all this is another soap opera because, Freddie has not been involved in any wrongdoing.  When their executives were taken to task on the hill, they came out squeaky clean.  



Freddie buys mortgages from lenders then bundles them into securities to sell back to huge investors.  This business makes the American dream of home ownership possible because, the lenders turn these debts around easily for a profit.  In countries where there is no Freddie, the mortgage rates are prohibitive.



One way Freddie makes money is by managing risk well.  They only buy good loans - from borrowers with good credit ratings and stable jobs.  And this is where the problem occurred because some big wigs from the hill called their execs and yelled at them for this.  “How will the banks lend to those who are not so well off if Freddie buys only the safe loans!”  And so for one year, the goal in Freddie was to “Buy More Loans”.



Do you think the government big wigs who twisted Freddie’s arm were Republicans?  Think again because Republicans are on the side of the investors.  This is where the hypocrisy occurs.  The Democrats who pushed Freddie into bankruptcy are making a lot of noise about his special status today.  And the show goes on for the those who don't know any better.  But now you do.  So, if you get a chance to talk to the clowns please tell them, ”Save the drama for your momma.”

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