The Money Pit

Part of the problem this nation faces is the fact that the people supposed to be representing average Americans don’t live in the real world.

Members of Congress exist in a magic kingdom where money has no real value and they are under the impression that their power is unlimited.

Essentially, that means they are playing games of uber-Monopoly that comes with an endless bankroll of money that they seem to consider make-believe.

A million bucks? Petty cash.

A billion? Chump change.

A trillion? Now that’s getting sort of significant. But if you say it real fast, it’s just another step in the progression of unfathomable debt.

Want an example?

Well, let’s just take another look at a couple of Uncle Sam’s wayward children. We’re talking Fannie Mae and Freddie Mac, the two government-controlled mortgage companies that ran into hard times a couple of years back.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

When the bottom fell out of the housing market, Fannie and Freddie came home crying for help and a sugar-daddy Congress obliged.

And it shouldn’t be any surprise that we’re all still contributing to their welfare.

So guess what? Fannie Mae is asking for $1.5 billion in addition taxpayer aid — and painting a happy face on the matter since it was a smaller loss than expected in the second quarter.

Yep, that’s right. According to The Associated Press, “Fannie Mae said that it lost $3.13 billion … in the April-to-June period. The results were the best since the company was put under federal control in September 2008.”

“Across our industry, we are seeing a more realistic approach to housing and lending that bodes well for the future,” Mike Williams, the company’s chief executive, said in a statement.

But in the past, Fannie and Freddie were doing a high-wire act during a housing boom. They faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. When the market went bust, defaults and foreclosures piled up, and the government had to take them over. After all, it was a financial crisis of unprecedented proportions and drastic action had to be taken.

But two years later, here’s the cumulative effect of all that congressional benevolence. The latest request means the two have needed $146.4 billion to stay afloat.

Lawmakers promise to review over the next year the entire system for providing mortgages to Americans, which could include a dramatic overhaul and even the end of Fannie and Freddie. But shouldn’t that process have started back in 2008 when the problems began? Instead, lawmakers just threw money at the situation, and continue to do so.

In fact, Edward DeMarco, the government’s chief regulator of the two companies, is fairly clear in his assessment. “The country need lawmakers to come to an agreement on this.” The mortgage market, he said, can’t operate indefinitely with the government providing life support. “We’re going to have to figure out a solution.”

But are we sure that will happen? After all, we’ve got a Congress with all that Monopoly money burning a hole in its pocket.