An Argument for Giving Every American Their Own Shares in Fannie and Freddie

You were never seduced by the promise of one of those mortgages that let you borrow up to 100 percent of the income you planned to be making in five years.

It doesn't matter. With the bailout of Fannie and Freddie you and every taxpayer are proud owners of your very own piece of the subprime mortgage catastrophe.

Why? Simply put, because the government is using your money to invest in these two teetering behemoths that together hold, as the media never tires of telling us, around half of all U.S. mortgages.

The argument for the bailout makes sense. It must, to get Senators McCain and Obama to agree. But now that it's happening, and my money is being used to fund it, I want my part of these two quasi-public entities that have always had the implicit guarantee of the federal government.

And you should have your part, too.

So my idea is for the government to open an account in the name of every taxpayer, and allocate half of all outstanding Fannie and Freddie shares based on how much tax you've paid, on average, over the last five years. The other half can stay with the current shareholders.

That seems fair and reasonable, since without your generous capital infusion, they'd be sitting on some pretty useless paper. And given that their shareholders benefited for years and years from the weird hybrid status that Fannie and Freddie had, and from the privileges that millions of lobbying dollars secured for them. (Over the last decade, Freddie alone paid $94.8 million for lobbying services).

Think of what I am proposing as your personal bailout account. The stock is pretty much worthless now, but worthless or not, it's mine and yours. If the housing market turns around, the value of your account will rise. We've all seen bankrupt companies go through a workout and end up stable and profitable.

What's more, these accounts are perfect little repositories should the government need to jump in and throw a life preserver filled with your cash to anyone else. There's a lot of talk that Detroit is going to need a bailout (another area where both Senator Obama and Senator McCain are in rare unanimity.)

If that should happen, simply follow my model and put half those shares into the Personal Bailout Account system.

Yeah, I know the arguments against this idea before they're even made. I know that my "ownership" in the government's stake is implicit in my citizenship. But if I'm going to contribute to saving someone from their stupidity and greed, if my cash is going to be exchanged for stock, I want to be able to look at that equity every single day. And I want the people who are running this new "conservatorship" to know that we're all looking at it every single day.

Hey, with that kind of attention to the granular, as opposed to the mush-it-all-together economics that sustained the subprime fantasy madness, we might never have had this problem in the first place.

Comments

[Adirondacker]

Why should the shareholders get anything at all? I thought the whole idea behind stock corporations was that you either made money or lost it. All sorts of bad decisions were made. Too bad. The market has spoken, you lost your shirt.

[MrWampler]

This idea dovetails quite nicely with Bush's privatized Social Security plan.

[carolontheweb]

Why aren't Dan Mudd and Richard Syron sharing a cell with a gal named Darnell????

I want vengeance.... America is in the mood for vengeance.... why not these bums?

I want the orange jumpsuit and shackles.... The photo op alone would raise the spirits of the country.

[marijam]

Best idea I've heard. Privatize it by letting the American people buy shares, thus bailing it out.

[WIpatriot]

I'll take two....

[WASanford]

The FNMA, Fannie Mae, was formed as a government agency in 1938 as part of FDR"s New Deal to provide capital to the mortgage market. It was converted to a GSE, Government Sponsored Enterprise, in 1988 in order to take its activities out of the Federal Budget. Its name was copied from a Washington chocolate company named Fanny May.

In the ensuing years, everyone bought into the myth that housing prices would keep going up forever. That"s right, what goes up, doesn"t come down. As we now know, that myth was WRONG. We should have learned this lesson from the Great Depression. Then, working on that same premise, mortgagers would lend the money for the purchase of a house and allow the borrower to make interest only payments for three years, and then the appreciated value of the house would be used to re-finance the mortgage. It didn"t work any better then than it does now because as the depression grew borrowers lost their incomes and were unable to qualify for the loans. Then, as now, foreclosures ensued.

That"s the trouble with not bothering to learn history. You keep repeating the same mistakes over and over again.

Let"s revert back to what we had in 1938. Let"s you and I own this "enterprise." After all, we"re the ones who paid for it.

[lightbearer]

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[lightbearer]

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[SamThornton]

Let's get our terms straight. The takeover of the Fannies is not a bailout. That would imply they are still privately owned and operated. This was a nationalization, exactly the kind of action that Karl Marx predicted was inevitable in a capitalist economy. One of history's little ironies is that what may be the largest seizure in history of private property by a government was orchestrated by the party of big business, the Republican Party.

The lesson to the American business community is clear: While today's deregulation may generate quick, short-term profits, the ultimate price down the line is nationalization.

[mamacat]

Conservative pundits like George Will are still clamoring for less oversight, not more. Makes me think that maybe we are doomed to go extinct, if we can never learn anything.

[ChicagoMolly]

Exactly! I've been telling people the proper name for this lot of republicans should be Busheviks. You've spelled out just one of many reasons why it fits.

[sharpstyx]

nice idea, but a stake in a pile of crap is still crap, even if its a big stake, right...?

[hopeless277]

How can socialism for the rich work if you give shares to ordinary working Americans? Silly man.