I finally took a few minutes to research the ownership and takeover earlier this month of Fannie Mae and Freddie Mac, in reference to the supposed “gaffe” by Sarah Palin, in which she said that they had “gotten too big and too expensive to the taxpayers.”
Palin made that statement in Colorado Springs on the same day that these privately held but government guaranteed organizations (GSEs, or government sponsored enterprises) were taken over by the federal government (the technical term is “conservatorship”).
In other words, the government assumed responsibility for the running of these organizations, including replacing their CEOs*.
The takeover also means that the government has promised to invest (purchase stock) up to $100 billion into each company in any quarter in which they’d otherwise be insolvent.
Sure, there’s the possibility that taxpayers could ultimately profit from this investment, the operative word being “could”.
The point is, at the time Sarah Palin made that statement, the federal government was, in fact, not only running FNMA and FHLMC but had made a commitment to bail them out with infusions of taxpayer funds to the tune of $200 billion. That would be the largest bailout in US history.
I’m no economist, but what Sarah Palin said in Colorado Springs sounds correct to me, unless you believe that a guaranteed investment of public funds would not involve an actual expenditure of public money, the operative words being “would not”.
As it turns out, the Congressional Budget Office (CBO) agrees with her, too. They included $25 billion in estimated costs for the bailout in their budget deficit projections.
*Replacing but still rewarding: “Richard Syron, who was ousted from Freddie Mac, could get an exit package reaching $15 million while Fannie Mae’s deposed CEO, Daniel Mudd, stands to leave with $14 million”, per MarketWatch