José July 29, 2008 Real Estate , Economy Visits: 1 View Comments Print this post Send this post Copyright Jose Ramirez

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Fannie Mae and Freddie Mac were founded as corporations with government backing to fulfill a social function. Stability and liquidity in the markets and equal opportunities for housing are the criteria for both corporations. The recent events have achieved the opposite. Looking for reasons to understand what happened, and it seemed a matter of greed but now I found that in fact a definition of greed that fits perfectly.

Definition of greed

Under Greed in Wikipedia appears this: Greed is the selfish desire or pursuit of money, wealth, power, food or other possession, especially when it denies the same goods to others. (Translation mine)

Consequence of Greed

In the vocabulary of political economy , indicates that the consequence of greed is harmful because it robs the rich to the circulation temporarily and to industry capital, which should be nurtured.

Reason for greed

In Wikipedia says that Buddhists believe greed is based on an erroneous correlation between wealth and happiness that exaggerates the positive aspects of an object, ie the adquisisión of material goods has much less effect than we imagine in happiness. They add that studies in the field of happiness economics, confirm that once provided the basic levels of comfort, greater wealth does not produce greater happiness.

Remedy greed

Against greed arises charity according to the Catholic Church.

The goals of Fannie Mae set a good example of charity:

Was created Fannie Mae in 1938, under President Franklin D. Roosevelt, at a time When millions of Families Could not Become homeowners, or losing Riske Their homes, for Lack of a Consistent supply of mortgage funds across America.

The Government Established Fannie Mae in order to expand the flow of mortgage funds in all Communities, at all times, under all Economic Conditions, and to help lower the costs to buy a home.

Based on this Fannie and Freddie made a charitable use as capital to benefit those seeking homeownership encouraged to investors to share the risk from the mortgage, instead of this being taken exclusively by the mortgage lender.

Freddie and Fannie to the rhythm of greed

However, from the early 90's Freddie and Fannie, even though they had excellent finance, decided to retain a greater profit rather than securitize mortgages , as was his custom. Also acquire mortgage-backed bonds issued by other securitizations . This strategy entailed a greater risk but that was not motivated by the creation of stability, neither capital nor any advantage to their customers.

Alan Greenspan said on this,

"Do not Appear needed to supply mortgage market liquidity or to Enhance capital markets in the United States."

The sub-prime mortgages Fannie and Freddie were exposed to the market variables that were supposed to avoid. So today face the losses they have and great risk that required the intervention of the federal government.

Customers, bankers, brokers, members of Congress to the rhythm of greed

As I wrote earlier , all this was possible because all parties benefit at the time.

Via Cotizalia comes this User Input

"The interesting thing is that it is a system based entirely on greed," he argued last week in an Internet forum a social network, A Small World. "Those who want their houses are greedy, those who want to provide them are greedy and they want funded are greedy."

With the subprime was gradually corrupting a system that some scholars in the U.S. have recently come to baptize, "Structured Finance Predators" and that raises the question of who is ultimately responsible for the excesses: the mortgage broker, the bank issuer, the financial firm or agency securitization assess the risk of securitized assets.

The current crisis is equally damaging to many mortgage holders and investors in mortgage securities. It will be interesting to see how far this crisis will transform a phenomenon in the '80s dawned with the good intention of benefiting all and now has become an ally of greed.

What to do?

We can use the crisis to make an introspection on "where we got carried away" when we misuse of money motivated only by the desire to learn more without asking why. In this way we could participate in a reform of the institutions that supposedly serve us. Or, otherwise we might as stated MANXXX via twitter

Work sucks and the capitalistic sysytem by Which We Live sucks ... mans greed is main factor driving ... oh and the new Asrton Martin is hot.

What do you think?