Obama Looted Fannie Mae and Freddie Mac

President Obama never was shy about using his phone and pen to achieve what he could not get from Congress on regulatory matters.

But documents revealed last week show the Obama administration may have been willing to get around congressional decisions on spending by using a slush fund of sorts funded by the profits of Freddie Mac and Fannie Mae, the two government-sponsored home loan giants.



Fannie and Freddie are federally chartered enterprises which buy mortgage loans from banks and bundle them into securities that are sold to investors, thus freeing up capital so that banks can make more home loans.

They are government-sponsored enterprises, which means the government guarantees their loans. But they are run as private enterprises, with private leadership, a board of directors and, most significantly for this purpose, investors. They’re even listed on the stock market.


In response to the mortgage crisis of 2008, Congress passed the Housing and Economic Recovery Act, which provided $187.5 billion in government loans for Fannie and Freddie and placed them in conservatorship under the newly established Federal Housing Finance Agency.

But Fannie and Freddie were not in such bad shape after all, and in just a few years, they were turning profits and on course to pay back the government with interest and still have money to pay dividends to their investors.

In 2012, the Obama administration came up with a plan to divert those profits to the Treasury that became known as the Net Worth Sweep. Officials said the profits had to be diverted back into the Treasury because Fannie and Freddie were in a “death spiral” and would have to return for loans, and this money would be used for those loans. In other words, Treasury would take all the profits from Fannie and Freddie and hold them for future loans when they again found themselves in trouble.



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