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December 25, 2009

Obama to Keep Control of Fannie/Freddie

I'm certain the Obama Administration fully intended for this be lost in the holiday shuffle:

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

The struggling quasi-private mortgage and loan companies have no incentive to clean up their acts so long as they've got the taxpayer's ATM card. President Obama knows this, of course. Cleaning up would mean taking on fewer risky borrowers.

Treasury is re-writing the terms of the agreement when Fannie and Freddie were taken into conservatorship last year because Obama doesn't want to have to ask Congress for another bailout.


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posted by Gabriel Malor at 07:03 PM

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