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Mortgage Executive Kills Himself, After Obama Makes Freddie Mac Waste Money on Bailouts
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The chief financial officer of mortgage giant Freddie Mac committed suicide today today in his basement in Fairfax County. The Obama Administration forced Freddie Mac to run up billions of dollars in losses to bail out mortgage borrowers, including irresponsible high-income households whose payments are getting reduced to a ridiculously low level.
Until last year, Freddie Mac was a GSE — a Government Sponsored Enterprise, an entity chartered and subsidized by the federal government, but owned by private shareholders. But the federal government seized direct control of Freddie Mac last year after it ran up big losses.
Ironically, although the government took over Freddie Mac in the name of reducing its risky mortgage practices, it ended up doing just the opposite. The government made Freddie run up even bigger losses buying risky loans in an effort to artificially stimulate lending. In conduct reminiscent of Enron, federal regulators tried to prevent Freddie from disclosing to the public and the SEC how Obama’s mortgage bailout was forcing it to lose even more money.
The Government’s politically-motivated mismanagement of Freddie Mac shows why recent proposals to effectively nationalize the banks are a bad idea. Why should we trust the Administration to turn around failing companies, when the Congressional Budget Office says that the Administration’s $800 billion stimulus package will actually shrink the economy in the long run?
Given the government’s ability to take even a badly-managed company and run it even worse, why should anyone support Treasury Secretary Geithner’s recent demand for vast new powers to take over companies? Especially given Geithner’s history of bungling responses to past economic crises, such as his role in the destruction of Indonesia’s economy in the Asian Financial Crisis of the 1990s.
I was a huge critic of GSEs like Freddie Mac and Fannie Mae. My colleague Fred Smith criticized their practices for years. Congress ignored his prophetic warnings. But federal regulators and the Obama Administration have been so reckless that they have managed to make matters even worse.
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