Fannie Mae&&Freddy Mac

The Federal National Mortgage Association (FNMA) also known as Fannie Mae was founded in 1938 as a government agency that was created during Franklin Delano Roosevelt's New Deal. Fannie Mae is a government sponsered enterprise which is publicly owned that is used to make loans and loan guarentees. This helps provide liquidty to all of the primary mortgage markets.


Fannie Mae became a large monopoly in 1968, which is when the government stepped in (absence of Lassiez-Faire) and decided to convert half of Fannie Mae into a private corporation. The Federal Home Loan Mortgage Corporation (FHLMC) also known as Freddie Mac was the other private corporation. Freddie Mac was created in 1970; the corporation buys mortgages on the secondary market, pools them and sells them as mortgage backed securities to investors.



Up until recently, Fannie Mae and Freddy Mac seemed "too big to fail", but because of the "behind the curtain" events, no one was watching out for the business. Therefore this eventually led to a domino effect, and the company slowly began to fail because of "extensive financial fraud." Both companies did not raise enough money to reassure Wall Street that they would be able to withstand a downturn. If both companies were being watched carefully, then people who did not own jobs would not have been given mortgages they would not beable to afford. This did not only happen with Fannie Mae and Freddy Mac, but it also recently happened to AIG and Bear Stern. What this country needs is more support, and more people to watch the "behind the curtains" activites. Last year, Fannie Mae had 2.8 trillion dollars worth of mortgages and 23% of U.S mortgage debt.

The U.S government ended up taking control over Fannie Mae and Freddy Mac and decided to place the liabilities on the taxpayers of the United States. Both companies are now placed in the control of the Federal Housing Finance Agency. By seizing back both Fannie Mae and Freddy Mac the government will be preventing several actions.
1. If AIG, Bearn Stern, Leighman Brother's all fall, and there happens to be a company still standing, the last company standing could form into a monoply, which will create issues for example like during the times of the railroad monoplies under control on Vanderbilt.
2. If the government did not help, besides the most obvious, the economy beginning to fail, the people would loose their homes, all of their mortgages...ect.