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Fannie Mae, Freddie Mac – Federal Ineffectiveness and Some Libido Dominandi
Guest Column | By Marion Edwyn Harrison, ESQ. | August 21, 2008
Scholars
usually attribute the phrase libido dominandi
to that memorable work of Saint Augustine of Hippo (354 - 430),
THE CITY OF GOD. (Hippo and
the hippopotamus, incidentally, are unrelated - the former once an African city,
the latter a dubiously accurate rendering of Greek for a water horse.) Probably
only a grasping commentator would characterize the top managers of Fannie Mae
and Freddie Mac as motivated by a version of libido dominandi
but why not? One can translate libido dominandi
as “the lust for power, advantage and glory[,]” as the renowned scholar Father
Richard John Neuhaus has done. If grossly overpaying oneself were not a
manifestation of lust for money and that lust weren’t a lust for power,
advantage and glory then nothing would be.
So much for
amateur philology. Fannie Mae, more formally the Federal National Mortgage
Association, dates from a Great Depression year, 1938. Freddie Mac, more
formally the Federal Home Loan Mortgage Corporation, dates from 1970. The two
entities dominate the American mortgage market. They own or insure a gigantic
chunk of American residential mortgages, about 40% of some $11 trillion
(estimated by INSIDE MORTGAGE
FINANCE, a trade
publication usually evaluated as reasonably reliable).
In the second
quarter of Calendar Year 2008, concluding June 30, Fannie Mae managed to lose
$2.3 billion. In the past three quarters the two combined have managed to lose
about $11 billion. The accuracy of such figures when so gargantuan really
doesn’t matter that much. The two entities have commercial characteristics but
supposedly to some extent are overseen, or at least influenced, by the Federal
Government. Together they function somewhat monopolistically (in the non-legal
sense of the word), tremendously influencing housing, and hence, the economy.
The sad fact is that each materially and significantly has contributed to a
dangerously shaking housing crisis and economic
downturn.
Many, if not
all, economists prophesy worse is ahead.
Meanwhile there
is no Federal effort with respect to Fannie Mae, Freddie Mac, the housing
shambles and the overall economy which is likely to be substantially
productive. Bailing out each, partially at taxpayers’ expense, is proposed.
Restructuring them into wholly Federal agencies also (somewhat secondarily) is
proposed. Many, perhaps most, economists doubt that either alone would solve
the crisis or near crisis. This unfortunately is inevitable or nearly inevitable
when the problems are so pervasive and the White House is of one political party
and narrow majorities of both Houses of Congress are of the other party with
liberal leadership disproportionately interested in embarrassing the
President. Add to that the fact that 2008 is a quadrennial year - the
Presidency up for grabs, as well as, at least theoretically, all the House and
one-third of the Senate.
What has the
“expert” Fannie Mae and Freddie Mac corporate leadership achieved to prevent
this massive fiasco, much less to remedy or partially remedy it? Few bankers,
builders, businessmen, economists identify much of anything. Libido dominandi
or otherwise,
Fannie Mae and Freddie Mac top officers, following their predecessors’
compensation packages, have not suffered. Fannie Mae’s top six in 2007 were
compensated from $4.6 million to $14.2 million each, totaling $47.8 million,
plus fringe benefits. Freddie Mac’s top four were compensated from $3.3
million to $19.8 million each, totaling $33.1 million, plus
fringes.
That some
wholly private corporations may excessively pay their top executives is a
separate subject. At least theoretically those entities are influenced, to
some extent controlled, by shareholders. If the Feds are to share in
influencing, managing or regulating an organization then responsibility and
compensation should reflect competence, consequences and bottom lines. So much
for libido dominandi
or, if you
prefer, just plain love of big bucks.
Let nobody say
amateurs as well as professionals have not long anticipated and observed
trouble. Where have the Feds as well as the Fannie Mae and Freddie Mac key
personnel been? Just busily cashing their
paychecks?
Marion Edwyn Harrison is President of, and Counsel for, the Free Congress Foundation.
This column is the property of the Free Congress Foundation and may not be reproduced without their permission. For comments and inquiries, contact Phyllis E. Hughes at
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Guest columns do not necessarily reflect the views of Accuracy in Media or its staff.
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