Fannie, Freddie and a Dearth of Leadership
So the markets are giddy about the bailout of Fannie Mae and Freddie Mac. Of course they are. Taxpayers are footing the bill, and that makes businesses happy.
I liked Steven Pearlstein's column about the bailout, which points out to what seems to be an apathetic public how historic a move this is. "The crisis reminds us that, left on its own, the private sector will over-invest when the housing market is hot and then abandon the market when boom turns to bust," he writes. "If we are going to rely on government to bail out private entities, then government ought to have a much stronger hand in making sure a rescue is never needed."
Translation: the companies lack sufficient leadership to see beyond their own quarterly bottom lines, so we're going to have to find leadership elsewhere.
But where? Fannie Mae and Freddie Mac are about to endure significant leadership turnover at a time when leaders are lacking. Executive attrition is reaching crisis levels. Leaders leave businesses faster than ever. We've even lost one of the smartest leadership thinkers this year. In a touching blog post, Stewart Friedman eulogizes his friend, leadership guru Joel DeLuca. DeLuca's book Political Savvy: Systematic Approaches to Leadership Behind the Scenes, seems particularly appropriate reading for whoever will be involved in the Fannie and Freddie mess.
It's definitely worth watching what collection of leaders is chosen to undertake the misery of undoing the damage in the mortgage industry, and also, as blogger Annie McKee discusses, how those leaders are chosen. She writes about choosing leaders that "the bottom line is emotions matter."
As Pearlstein writes, "Not since the early days of the Roosevelt administration, at the depth of the Great Depression, has the government taken such a direct role in the workings of the financial system."
Where are the Roosevelts now?
By
Scott Berinato
|
September 8, 2008; 12:15 PM ET
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Posted by: Michael LittleBig | September 8, 2008 1:19 PM
I really don't have the background to wrap my arms around this issue. But I am comfortable knowing that Senator McCain and Governor Palin have the national economic expertise to prevent future problems such as this.
Posted by: Jackson | September 8, 2008 1:37 PM
Whatever happened to small govt? What lunkheads allowed Fanny and Freddy to become involved with anything less that 20% down payment for any house? Bye-bye USA credit rating!!! Welcome inflation and depression!
Posted by: Monte | September 8, 2008 1:41 PM
OK you can probably blame the "leadership" and Fannie and Freddie for some of these problems. But in many ways, what do you expect. Some blame has got to go to Congress in mandating that home ownership for more people is a good idea. As in all things, the road to hell is always paved with good intentions. Both liberals and conservatives saw this within their own political philosophies as a good, hey, there couldn't be any downsides to this, could there???
In order to make good on this mandate, the only way around was to loosen financial qualifications for potential buyers. A similar event happened back in the mid-70s when federal regulators, responding to equal treatment of the sexes, allowed total family household income to be used for loan qualification, effectively allowing the income from your spouse to be counted in the loan application. I think everyone would agree that this was certainly both just and a good idea. But like in all things in life, there is an upside and a downside to this idea. In effect, within a few years, housing prices increased (in my area they almost doubled) and now your spouse was REQUIRED to work. The idea of the "stay at home mom" was pretty much over. Only those with a highly paid spouse could afford to buy a home.
In the end, we are paying the price of a Congress that is far too busy running for re-election and not spending time looking very closely at some of its mandates. As the old saying goes, "if it looks too good to be true, maybe it isn't".
Posted by: RedRat | September 8, 2008 2:03 PM
Someone who doesn't have the expertise to "wrap his arms" around this one and believes McCain and Palin who represent the same ideas that got us into this mess will be able to get us out seems fanciful. A panel of financial experts on Charlie Rose painted such a grim picture of our nation's financial health that it sounded like the Fall of the Roman Empire. Somehow rewarding the folks who took us down this path to nowhere with four more years of governance seems downright stupid.
Posted by: Elinor | September 9, 2008 1:03 AM
Fannie Mae and Freddie Mac bondholders are happy. The list includes foreign governments and sovereign wealth funds.
From China to Israel to the United Arab Emirates, this administration chose to make them whole, while ignoring the plight of millions of Americans.
Not only is your gas money going to SWF's, so now is your tax money. A pox on all their houses.
Posted by: Alan | September 10, 2008 10:02 AM
The comments to this entry are closed.
It is frightening to believe the Congress of the United States with all their law degrees and access to the smartest people on earth bowed to those who have financially ravaged our society. This Congress watched this housing crisis unfold for years and did nothing. Now this Congress continues to watch as the government without any shame, save the rich and famous by using taxpayer money to support these billionaires.
Why should our society be punished and stripped of our assets to support those who without restraint who have pillaged and raped our financial heritage . Those 4 million people whose homes were taken in foreclosure have no voice because Congress has refused to permit legislation to provide the forum within the regulatory system so that those victims can speak with substance. It is therefore outrageous that the Congress has given the forum that has permitted the voice of the rich and powerful to heard above all others.
Something is radically wrong with a government that lives better than its people to save those that made billions off of the citizens who elected this defective government.
The politicians who talk about the American dream have really crafted the American nightmare.
These politicians use their voice to utter worn out promises and feel good phrases to drown the voices of the majority who have no hope for the future.
I am an American, I did serve my country, I followed the rules and on March 17,2008 the Sheriff and in essence with the Congress of the United States in Cleveland Ohio sold my home of 7years in a foreclosure auction based on a complaint by The Am Trust Bank who did not the follow the rules of which such violations were ignored by their federal regulator the Office of Thrift Supervision.
Michael LittleBig
9-8-2008.