At first glance Fannie Mae, Freddie Mac and Britney Spears may not seem to have anything in common, but all three are now under conservatorship due to going downhill fast!
I am not an economist, nor am I a financial expert, but almost anyone can recognize that the government takeover of Fannie Mae and Freddie Mac is a bad sign. It certainly isn’t news that our economy is in bad shape, but this is so “in your face” that it’s downright scary.
This past week we saw the takeover of Fannie Mae and Freddie Mac, followed by the announcement of the grave trouble at Lehman Brothers and then rumblings that Washington Mutual is also in a serious predicament. This is no longer just a problem for ‘the little guy.’ The effects of the downturn in the economy up until months ago were mainly felt by those with sub-prime mortgages, people in the auto/steel/coal industry and those who were solidly middle class. Now the tidal wave has taken everyone under. Wall street bankers and hedge fund managers who normally don’t even bat an eye going out to a fancy restaurant and ordering the prime rib for lunch have great reason to be wary. No one is immune and I find this nerve-wracking.
As for Fannie and Freddie, I am perplexed. While I fully grasp the current situation, it seems fundamentally unfair. How is it that Fannie and Freddie when doing well are run as private fortune 500 companies reaping tons of reward for their investors and yet now that they are in trouble, taxpayers are the ones who will have to bail them out. This is a major structural problem in the configuration of the companies. Fannie and Freddie aren’t just any fortune 500 company, they are the largest ones out there! Many argue that while it is unfortunate that Fannie and Freddie are now the taxpayers responsibility, that the CEO’s have been fired and aren’t getting away with anything. Unfortunately this is untrue. Sure, the CEO’s have been let go, but they are still “set” monetarily. They still reaped rewards for years prior to this recession and now have the fruits of Fannie and Freddie’s better days to live off of.
Not being an expert in finance, I have no good solution for this conundrum. I am willing to say that the government had almost no choice but to bail out Fannie and Freddie, but I hope that when the companies are turned back over to be run privately that the fundamental errors in structure are addressed.
Mostly, all the economic upsets we have seen this week make me even more passionate in my beliefs that we must have a President and Vice President who are willing to take a long hard look at things in order to change our economy for the better. Privatizing social security at this point is a pretty scary thought, as is the possibility of a Sarah Palin presidency. As for Britney, I am sad to report that her current situation is much more optimistic than that of the US economy.