Business

Perhaps no industry has been hit harder by our country's "mental recession" than the mortgage banks, and two in particular, Fannie Mae and Freddie Mac, have been all over the news lately.

Sunday, the Bush administration announced that it will ask Congress to approve a deal giving the government authority to buy billions of dollars in stock in both of the fledgling companies. Yes, it was just last week when Treasury Secretary Henry Paulson said a bailout is not "on the horizon" (the two-day horizon?).

Should you run out to your neighborhood Fannie Mae or Freddie Mac store and load up on subprime mortgages? And what's the deal with this couple? Who are they? Why should we give a hoot? Look no further than our FAQ: Fannie Mae and Freddie Mac.

So I turn on CNN hoping to see Jesse Jackson talk about slicing Obama's nuts clear off, when I'm bombarded by two douchebags.

Is this a question?

Who the hell are Freddie Mac and Fannie Mae? Weren't they in that band Queen?

No. The real name for Fannie Mae is the Federal National Mortgage Association, but it's better known as Fannie Mae.

I don't get it. Wouldn't it be known as "Fnma"? That would be cool. Sounds like "enema."

Right, so that's probably why they chose Fannie Mae.

But don't these companies need to cleanse?

I...um...

So we should call this one "Fnma," like "enema." It's funnier.

To you, maybe.

What about the other one, Freddie Mac?

That's short for the Federal Home Loan Mortgage Corporation.

Seriously? Who's the genius who derived "Freddie Mac" from FHLMC? It would make more sense to call it "Phil Mick" or something. Like Phil Mickelson. He probably has a mortgage.

Probably.

Who came up with these dumb names, anyway? The government?

Both are publicly traded corporations but they have close ties to the federal government.

Wow. That's crushingly boring. What does each do?

Freddie Mac is a stockholder-owned corporation authorized to make loans and loan guarantees. The company buys mortgages on the secondary market, pools them, and sells them as mortgage-backed securities to investors on the open market.

Markets and pools? That sounds like my grandmother's condo complex in Boca Raton. Are they similar?

Kind of, but not at all.

Dare I ask about Fannie Mae?

Fannie Mae is also a stockholder-owned corporation authorized to make loans and loan guarantees. But it is not backed or funded by the U.S. government, nor do the securities it issues benefit from any statutory government guarantee or protection.

Did you just say something? Because all I heard was "statutory." Is that like statutory rape?

It is nothing like that.

I'm so bored, and all this talk about Mac this and Mac that has depressed me because I can't afford an iPhone.

Do you even own a cell phone?

Hey, does Freddie Mac have anything to do with Easy Mac? Because I'm getting hungry.

Don't leave yet. You're almost there.

Okay. So what's the news about these companies?

The stock prices of both companies went way down, due our friend the mortgage meltdown. Remember, we've talked about that before.

Yeah! Panic at the disco!

What?

Not sure, but I've always wanted to say that. Seemed like a good time to throw that in.

Great. Anyway, because Freddie and Fannie both backed high-risk mortgages, both companies are struggling under serious debt.

Tell me about it. I took a payday loan from a company for $200, and I think I've been paying them $150 a month for like two years.

Wow. Yes, that is serious debt.

Can I get a loan from Freddie Mac or Fannie Mae to help me pay my payday loan? That would be cool!

I'm pretty sure neither Fannie Mae or Freddie Mac want to take on any more loans with all-but-certain default.

All-but-certain default? Excuse me?

I think now might be a good time to heat up that Easy Mac.

Mmmm. Yeah. What does that stand for?

Good livin'.

Posted by: David Bourgeois      I’m a fan of David Bourgeois