Fannie Mae and its sister institution Freddie Mac buy mortgages from banks. That is what they do. This means that when Fannie and Freddie lose money, they paid banks too much money for the mortgages.
This point should be so simple that even an economist could understand it. This is why it is disturbing when newsarticles on Fannie's newly announced loss of $15 billion in the last quarter don't point out that this is money given to banks.
The key issue is whether Fannie and Freddie's losses are due to mortgages and mortgage-backed securities purchased prior to their takeover in September of 2008 or whether they are the result of mortgages purchases subsequent to that date. If the latter is the case then the Treasury Department is effectively using Fannie and Freddie to run a TARP program, purchasing mortgages from banks at above market prices. This amounts to a huge taxpayer subsidy to Jamie Dimon, Lloyd Blankfein and our other favorite bankers.
Unlike many news organizations, the Prospect has remained staunchly committed to keeping our journalism free and accessible to all. We believe that independent journalism is crucial for a functioning democracy—but quality reporting comes at a cost.
This year, we’re aiming to raise $75,000 to continue delivering the hard-hitting investigative journalism you’ve come to expect from us. Your support helps us maintain our independence and dig deeper into the stories that matter most.
If you value our reporting, please consider making a contribution today. Any amount helps secure our future and ensure we can continue holding power to account.
