Saturday, September 06, 2008
Fannie Mae - Then and Now
Speculators have been intrigued largely because Fannie Mae's quasi-governmental status exempts it from all the regulations of the Securities and Exchange Commission. Alone among the 1,325 common issues on the Big Board, Fannie Mae shares can be bought with only a 20% down payment, compared with the usual 65% margin for other stocks.
Why does Fannie Mae have this unique position? As a Government agency, created in 1938, it had little difficulty raising money for its mortgage loans on the private market; but all of these borrowed funds went on the Treasury's books as red ink, swelling the federal deficit. So Fannie Mae became a private corporation in 1968, and last May control of its board of directors passed into the hands of its 7,300 private stockholders. Nevertheless, Fannie Mae remains by law a "corporate instrumentality of the U.S.," and many crucial decisions concerning its borrowing, dividends and other matters are subject to approval by George Romney, Secretary of Housing and Urban Development. With $15.5 billion in assets, Fannie Mae ranks as the nation's eighth largest company.
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See, no special congressional oversight. |
