Marginal Revolutions

Fannie Mae also known as The Federal National Mortgage Association. This companies purpose is to securitize and purchase mortgages so that there are funds available to the institutions that lend money to home buyers. In 2008 Fannie Mae was placed into conservatorship by the FHFA. This is one of the most sweeping interventions by the financial markets in many, many years.

Fannie Mac was founded in 1938. It was added to the mortgage association in the wake of the Great Depression. In the year 1968 the government decided to convert Fannie Mae into a private share holder owned corporation. In the wake of this Fannie Mae did not guarantee the issue of government mortgages. Later on the government created Freddie Mac to compete with Fannie Mae. There is no guarantee to Fannie Mac at this time. It is not government backed nor does it receive government funding either.

In 2007 the housing crisis happened. Many borrowers that had poor credit became unable to pay their mortgages. Many of these were with a adjustable rate mortgage. This caused many thousands of home foreclosures. This eventually lead to the Treasury Department and the Federal Reserve to try to boost confidence in the situation. The government then granted Fannie Mae access to Federal Reserve low interest loans and removed the prohibition to purchase the GSEs stock. Despite efforts by 2008 shares of Fannie Mae had tumbled down more than ninety percent from its one year earlier levels. Fannie Mae was also rocked by scandal in 2004 for its accounting practices. In 2006 civil charges were brought against the chief financial officer. The lawsuit claimed that he and others manipulated Fannie Mae earnings to help them get more bonuses. The lawsuit tried to get back $100 million dollars in penalties and $115 million in bonus payment.