Free «Fannie Mae and Freddie Mac» Essay Sample

Fannie Mae and Freddie Mac were the common name for two government enterprises. They were used to refer to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, (Federal Reserve Bank, 2008). These entities however failed on the 7th of September in the year 2008. This was immediately after the chief executive officers of the firm were dismissed. The firms were pushed to making these decisions by the housing finance agency. The agency unfairly forced the enterprises to even sell some of its assets. The agency had no faith in the recovery of either of the enterprises. The assets, worth $400 billion, were meant to secure a loan, (Federal Reserve Bank, 2008)

The support that these two enterprises received from the government, kept them ahead of their competitors in the mortgage market. They however never admitted to this fact. The enterprises were granted ready market and could raise or lower their sales at any time. This however, never affected the rate of buying; the two enterprises were using unorthodox means to make money.



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The government had even gone ahead to exempt them from paying any kind of taxes and even the federal law was not to meddle in its issues. This was going against their intended purpose. They had been created for the betterment of the falling mortgage market due to the Vietnam War. Fannie and Freddie, even though they had accomplished this, they were already overdoing it. This is judging from the facts about the enterprises like, the bank showing them the same kind of treatment as the federal government.

By the year 1970, the enterprises'' remaining obstacle was eradicated. This was after the congress granted them more operating authority. The enterprises had the power to purchase government guaranteed mortgages. They could even use these mortgages as security for their operations. They were free to engage themselves in any buying practice and buy anything in the market. These new granted authority made then poses a superior power over all private enterprises.

By the year 1996, complaints were filed against the operations of both Fannie and Freddie. They stated that they were not serving their intended purpose. Instead of making living and shelter more affordable to the people, the enterprises were selfishly taking in profits, (Gene, 2010). By the year 2004 the value of the mortgages of the company had gone up to $20 billion. These profits were not meant to be the pride of the enterprises. They were mean to make sure the prices of homes went down. .

The two enterprises were faring on well until they begun keeping their affairs private. The way they used their funds and the profits they made were never heard of. Fannie Mae and Freddie Mac were following and acting in a way that was practiced in some third-world countries. They were taking on the role of the organizations which handles corruption issues. These organizations are the only ones that can be justified for privacy. They had even gotten close to starting their own money making department. The money that they borrowed was charging low interest for longer periods. They used the money to buy more mortgages. The mortgages bought by these were used to cover up for the expenses incurred in the market interests. The risk of incurring any loses was not a bother since the government had always got their backs. The enterprises never learned the key lesson and virtue in the community, to struggle. They always chose to use the easier way out.

By the year 2007, the enterprises started losing in the mortgage market. This was after the congress decided to create a new enterprise and Fannie Mae had become a private enterprise. The number of investor was dwindling due to the credit loses that the enterprise was incurring. This was even after the assurance made that all loses were in its control. The price of their shares was even dropping. They had been pushed to make this drop to compensate for the bad loans that the ente4rprices were making. They bought mortgages from the lenders in the market. However these mortgages did not have any assurance for success. They were all a big risks.

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It was at the late 2007 that the shares of the enterprises completely went down the drain. This was owing to the fact that they were experiencing extremely high loses from loans, (Mark 2007). The enterprises went to all measures to retain their last clients. This includes going to the extent of making public lies. They opted to use wrong calculations to lower the rates at which they were making terrible lose. This, however, as Mark, (2007) states, did not go as planned. The enterprises assured their clients that soon they were going to get back on their feet. This statement was made by the chief financial officer Stephen Swad. The enterprises had reached a point when their star of success had to finally set. But still the enterprises were opting to use unethical means to rise to the top of the mortgage market.

In the same year, the mortgage market was increasing unfamiliar cases. They included the borrowers in the market were not putting any much efforts in repaying their loans. Many homes were introduced to the market. This led to the depreciation of their price. Borrowing of loans and buying of mortgages also became an issue. This is was due to the strict condition that the lenders were putting across. This depreciation in home prices led Fannie and Freddie to suffer more loses.

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The enterprises were also badly in need of financial assistance. However, the only loans they got were from the Federal Reserve and the treasury. However, these loans were almost insignificant in rectifying the situation. The treasury was even granted the authority to but the entities' assets. The treasury then went ahead to standup for the enterprises. The value of the enterprises' shares were terribly dropping to an approximation of 92 percent lose.

The treasury decided to eliminate the current creditors in odd ways. It did this was to guarantee the survival of Fannie and Freddie, (Harold, 1997). However, the support that the treasury showed to the enterprises dwindled over the time. This was due to the then political and economical crisis prevailing in the states. They forced the treasury to back out. The bonds that linked the treasury to other states were also weakening. The treasury failed to show the expected ethical values by first supporting unethical organizations and also practicing the virtue of betrayal, (Harold, 1997). . The treasury was ethically expected to stand up firmly for whatever it stood for.

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As a parting shot, both Fannie and Freddie bear the blame for their failure. They let their desire for richness lead them to use unethical means to get money. They even went ahead to ignore their core duties. Who knows: maybe sticking to their original goal would have finally led them to the success they so much desired. The treasury on the other hand, used orthodox means to create bonds with other states, including upholding the two enterprises to act as mediators in the bonds.


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