Tuesday, November 18, 2014

Government Bailouts

Government Bailouts


The government invested in Fannie and Freddie preferred stock carrying a 10 percent dividend. It changed its mind and decided to confiscate all earnings of Fannie and Freddie in perpetuity — despite the fact that the government recovered its entire investment with interest and will likely book a $200 billion profit on the sale of its common stock in the two government-sponsored entities.
Moreover, the government placed Fannie and Freddie in a “conservatorship” to preserve their assets and restore them to health, which cannot happen if they are stripped of all earnings.
I do not envy those in government who have to deal with the next crisis if this decision stands; they will have no credibility.
Sarasota, Fla., Oct. 21, 2014
The writer is a former chairman of the Federal Deposit Insurance Commission and a senior managing director for a consulting firm.

William M. "Bill" Isaac was the Chairman of the Federal Deposit Insurance Corporation from 1981 to 1985. 

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