stacks
unique-design

Fannie Mae, Freddie Mac and Sallie Mae

1938 Fannie Mae, the Federal National Mortgage Association, is founded by government decree as a government agency in 1938 as part of Franklin Delano Roosevelt's New Deal (an extension of Herbert Hoover's New Deal), in order to provide liquidity to the mortgage market.

From 1938 to 1968, the secondary mortgage market in the US is monopolized by Fannie Mae. To provide competition in the secondary mortgage market, and to prevent Fannie Mae from continuing to have a monopoly, Congress chartered - forged by government decree - Freddie Mac as a private corporation to compete in this same market.

1968 Fannie Mae is converted into a private corporation to help balance the federal budget. Fannie Mae at one time was the ninth-largest business in the world according to Forbes.

1972 Sallie Mae, the Student Loan Marketing Association is iforged in 1972 as a government sponsored enterprise. The coorporation remains the country's largest originator of federally insured student loans.

"The dirty little secret of the guaranteed student loan market is how concentrated it is: only 32 lenders hold 90% of the loan volume. The Education Department has found that at about 300 colleges one lender controls 99% of loan volume - essentially holding a monopoly on those campuses" - Stephen Burd



The Student Debt Crisis in America:
Nothing Less Than A Student Debt Jubilee Will Do

Federal Reserve Finds Student Debt Reducing Millennial Home Ownership

Ripping Off Young America: The College-Loan Scandal

Why I Defaulted on My Student Loans

Who got rich off the student debt crisis


1996 Lenders of student loans are specifically exempted from the Fair Debt Collection Practices Act.

The statues of limitations are removed from student loans in 1999 so debt is never retired. Student loans are now never forgiven in bankruptcy. Student seeking loans are not allowed to shop loans as most institutions have captive lenders. Student loans may be refinanced only once, so if interest rates drop the borrower will be stuck with the original rate. Defaults are typically charged 25% of the loan value. Student loans are also exempt from "truth in lending" regulations and rules that require lenders to explain fees and interest rates. Student loan collection rights include the right to garnish wages, tax refunds, Social Security payments and disability payments.

Student Loan Justice

2000 Sallie Mae started its Opportunity Loan Program.

A lender hands a college a fixed amount of private loan money which the college then lends to students with credit problems for higher rates with less consumer protection. The college then promises to make the lender it's exclusive provider of loans backed by Sallie Mae. In the past this used to be called monopolizing a captured market through kickbacks. Sallie Mae denies wrongdoing but agrees to pay a $2 million fine.

2005 Freddie Mac hires the lobbying and PR firm DCI Group for a "stealth lobbying campaign." DCI did not file lobbying reports on the contract, and Freddie Mac executives referred to the lobbying campaign as their "stealth lobbying campaign." In 2006, the Freddie Mac made "six-figure payments to 52 outside lobbying firms and political consultants," including former House Speaker Newt Gingrich ($300,000 in 2006 to push for increased deregulation) and former Senator Alfonse D'Amato.

2006 Fannie Mae pays a fine of $400 million for alleged accounting manipulations and lying to investors. Earnings are reduced by $6.3 billion.

Freddie Mac is fined $3.8 million for illegal campaign contributions arranged by Freddie Mac lobbyists. Freddie Mac pays Newt Gingrich $300,000 to push for increased deregulation. Freddie Mac agrees to settle lawsuits stemming from a $5 billion profit reduction restatement of 2003 earnings.

2007 Private equity group led by J.C. Flowers that had sought to buy out Sallie Mae informed Sallie Mae that if reductions in subsidies pending in a legislative bill were passed by Congress then the sale would be at risk. George Walker Bush requested a reduction of subsidies to Sallie Mae of $16 billion. The House approved of a measure that would lower subsidies by $19 billion over five years. No subsidies = no deal - when J.C. Flowers did not get the promised subsidies the deal sank.

2008 The director of the Federal Housing Finance Agency (FHFA), James B. Lockhart III announces his decision to take Fannie Mae and Freddie Mac into conservatorship run by FHFA. Over 98% of Fannie's loans were paying timely but $270 billion in loans that Fannie Mae had purchased or guaranteed between 2005 and 2008 were now considered risky.

Fannie Mae and Freddie Mac each had a positive net worth as of the date of the takeover which was triggered by credit default swap derivative contracts. In credit default swap parlance this is termed a credit event.

It triggers the settling of outstanding contracts for the derivatives, which are used to hedge or speculate on the potential risk that a incorporation will default on its bonds.

"Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill - which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers - a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed." - David Corn

Fannie Mae and Freddie Mac had approximately $ 1.5 trillion in bonds outstanding, and since the market in credit default swaps is not public, there is no central reporting mechanism to verify how many credit default swaps are linked to those bonds.

Fannie Mae unveils the "HomeSaver Advance" plan to provide "foreclosure prevention assistance to distressed borrowers" to avoid increased losses of as much as $2.4 billion in credit default swaps.

About 71,000 cash advances to forestall foreclosure with an average value of $6,500 for a total of $462 million In spring 2009 Fannie Mae valued those loans at $8 million.

"Whatever credit defaults are in theory, in practice they have become mainly side bets on whether some incorporation, or some subprime mortgage backed bond, some municipality, or even the US government will go bust. Call it insurance if you like, but it's not the insurance most people know. It's more like buying fire insurance on your neighbor's house, possibly for many times the value of that house - from a incorporation that probably doesn't have any real ability to pay you if someone sets fire to the whole neighborhood." - Michael Lewis & David Einhorn 01/03/08

"On September 7, 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that play a critical role in the US home mortgage market, in conservatorship. As conservator, the FHFA has full powers to control the assets and operations of the firms. This means that the US taxpayer now stands behind about $5 trillion of GSE-issued debt." - Mark Jickling, November 24, 2008

"When Fannie Mae and Freddie Mac were taken into conservatorship by the government, they were leveraged at an eye-popping 100 to 1." - Mike Whitney
Franklin Raines, Bill Clinton's White House budget director, is accused by the Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, of abetting widespread accounting errors based on the overstated earnings estimated at $6.3 billion. The OFHEO announced a suit against Franklin Raines in order to recover some or all of the $50 million in payments made to Franklin Raines. Former Fannie Mae chief Franklin Raines, chief financial officer Timothy Howard and former controller Leanne Spencer agreed to a $31.4 million settlement.

2009 David Kellermann, CFO of Freddie Mac, commits suicide.
Freddie Mac asks for $31 billion in additional aid after posting a gargantuan loss of more than $50 billion in 2008. The loss' were driven by $13.2 billion in hedged trades, $7.2 billion in credit losses from the declining housing market conditions and $7.5 billion in write-downs of the value of its mortgage backed securities. The incorporation also took a charge of $8.3 billion for now-worthless tax credits.
unique-design


unique library index

This web site is not a commercial web site and is presented for educational purposes only.





This website defines a new perspective with which to engage reality to which its author adheres. The author feels that the falsification of reality outside personal experience has forged a populace unable to discern propaganda from reality and that this has been done purposefully by an international corporate cartel through their agents who wish to foist a corrupt version of reality on the human race. Religious intolerance occurs when any group refuses to tolerate religious practices, religious beliefs or persons due to their philosophical ideology. This web site marks the founding of a system of philosophy named The Truth of the Way of Life - a rational gnostic mystery religion based on reason which requires no leap of faith, accepts no tithes, has no supreme leader, no church buildings and in which each and every individual is encouraged to develop a personal relation with the Creator and Sustainer through the pursuit of the knowledge of reality in the hope of curing the spiritual corruption that has enveloped the human spirit. The tenets of The Truth of the Way of Life are spelled out in detail on this web site by the author. Violent acts against individuals due to their religious beliefs in America is considered a "hate crime."

This web site in no way condones violence. To the contrary the intent here is to reduce the violence that is already occurring due to the international corporate cartels desire to control the human race. The international corporate cartel already controls the world economic system, corporate media worldwide, the global industrial military entertainment complex and is responsible for the collapse of morals, the elevation of self-centered behavior and the destruction of global ecosystems. Civilization is based on cooperation. Cooperation does not occur at the point of a gun.

American social mores and values have declined precipitously over the last century as the corrupt international cartel has garnered more and more power. This power rests in the ability to deceive the populace in general through corporate media by pressing emotional buttons which have been preprogrammed into the population through prior corporate media psychological operations. The results have been the destruction of the family and the destruction of social structures that do not adhere to the corrupt international elites vision of a perfect world. Through distraction and coercion the direction of thought of the bulk of the population has been directed toward solutions proposed by the corrupt international elite that further consolidates their power and which further their purposes.

All views and opinions presented on this web site are the views and opinions of individual human men and women that, through their writings, showed the capacity for intelligent, reasonable, rational, insightful and unpopular thought. All factual information presented on this web site is believed to be true and accurate and is presented as originally presented in print media which may or may not have originally presented the facts truthfully. Opinion and thoughts have been adapted, edited, corrected, redacted, combined, added to, re-edited and re-corrected as nearly all opinion and thought has been throughout time but has been done so in the spirit of the original writer with the intent of making his or her thoughts and opinions clearer and relevant to the reader in the present time.


Fair Use Notice
This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of criminal justice, human rights, political, economic, democratic, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information see: www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Dedicated to the establishment of knowledge, truth, justice and a clear understanding of reality as the American way!
Copyright © Lawrence Turner
All Rights Reserved