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Fannie’s loss is Uncle Sam’s gain

Jerry Deschane is the president and owner of Deschane Communications LLC, a lobbying, consulting and communications firm specializing in the construction industry.

By Jerry Deschane

The federal government is making a killing on mortgages.

Since fall 2008, when the government stepped in to keep the bankrupt Federal National Mortgage Agency (Fannie Mae) and her little brother, the Federal Home Loan Mortgage Corp. (Freddie Mac), from collapse, Uncle Sam has reaped returns that would make even the owners of Apple take notice.

According to recent news reports, the steady recovery of the housing market has resulted in Fannie earning a $10.1 billion profit in the last quarter alone. At that pace, which probably will continue for the near future, the two giant mortgage resellers will repay the government’s $185 billion bailout within a year, and could earn significant profits for the government after that.

In the words of Russian Cosmonaut Lev Andropov, a character in the 1998 movie “Armageddon,” “So, is ‘dis good, or bad?”

Is it good that the government is in position to make a profit on a takeover/bailout/rescue of a critical private business? Is it good that the longer Congress dallies with the replacement of these bankrupt behemoths, the more money will flow into the federal treasury?

I have mixed feelings, but I’m nervous.

On one hand, the fiscal hawk in me says, “Take the money!” The government did what had to be done, taking a big risk in the process, a risk that taxpayers fully expected to pay for, to keep the economy from sliding right past “recession” and into economic “Oh no!”

The capitalist in me says, “What’s wrong with Uncle Sam coming out a financial winner for a change?”

On the other hand, anyone who has been to Las Vegas knows that when a bet pays off, the greatest temptation is to bet again and to bet bigger. Will the success of the Fannie-Freddie takeover infuse Congress with roulette fever, encouraging it to invest in more of the economy? Have we moved from “laissez faire” to “let it ride!”? Why not buy up Detroit or the pension funds of those hundreds of states and cities that are criminally short on money? Aren’t the good workers of Detroit worth the investment? The press release writes itself.

Perhaps I’m just being cynical. Fannie and Freddie needed to be repaired, and Congress appears to be moving toward some sort of stable alternative.

Looking ahead, no one is suggesting that the Obama administration has proposed balancing the budget by speculating in hog futures. And it is difficult to imagine the federal government demanding an ownership share of Detroit in exchange for a bailout. Government-as-speculator has so many political limitations it’s hard to get too nervous.

On the other hand, the government, not unlike the rest of us, has a natural instinct to follow the money and to repeat what works. After all, General Motors still is building cars and Fannie Mae still is paying mortgages, aren’t they? What’s the problem?

Like I said, it makes me nervous.

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