Okay before everyone gets all bent out of shape about the title of the post let me get you up to speed on what prompted such a bizarre/potentially offensive statement.
Fannie Mae was placed into conservatorship of the Federal Housing Finance Agency (FHFA) on September 7, 2008. Unlike the banks that, at the time, were receiving large chunks of bailout money from the US taxpayers, Fannie Mae was not given a lump sum of money. By placing them into conservatorship the government basically bank rolled Fannie Mae. The extent of their backing was only limited by the budget ceiling of the entire Federal government as allowed by law. In layman's terms: This would be like if you were sitting in Vegas at a $100/hand table losing for hours and taking out markers well beyond your ability to repay. Then all of a sudden your multi-million dollar relative comes in and declares to the pit boss "I got his back....put him on my tab". In retrospect, that is a better analogy than I planned because Fannie Mae was essentially gambling with the types of loans they were insuring at that time. Anyway, I digress.
Flash forward to present day. Fannie Mae just posted a 2nd quarter profit of 10.1 billion dollars. They have pledged to make a 10.2 billion dollar payment to the treasury next month bringing their total dividend payments to the treasury at roughly $105 billion dollars. Considering they had borrowed $116 billion dollars from the taxpayers that is not as impressive as one might think but definitely on the right track.
So what does this have to do with Obama and the mob? I am almost there, I promise.
Just yesterday President Obama decided to come out endorsing a bill to start winding down Fannie Mae. Is this a horrible idea? No. However, this is the most absurd timing on so many different levels. Who are his advisers that allowed/encouraged such a premature speech? Here are the main three reasons why our President has egg all over his face:
1. Anyone that has ever seen an old mob movie or a movie about gambling with a bookie knows "dead men don't pay". You know what, I will even take it a step further. If you have ever seen "Rounders" the movie I believe John Malkovich's muscle says it verbatim. So what was our commander in chief thinking? As a U.S. taxpayer I am a little confused why AT MINIMUM the principal balance of our $116 billion is not paid back before such pointed comments are made. After all, I believe dead companies would have just as hard of a time paying back the money they owe as dead men. I am not a genius but I believe dead is universal across genres. Oh yeah, and there is also the fact that we as taxpayers (aka the treasury) own about 80% of the stock for Fannie Mae. That price is currently $1.56/share apparently on its way to $0. I can already hear the contrarians saying "calm down, he said unwind....not kill". Noted, now onto point number two and why I still think it is putting the cart before the horse.
2. I get head hunters calling me all the time to try and recruit me to some big fancy high paying position. Disclaimer: Please disregard the author's enormous ego....the previous statement is completely false. Businesses stay competitive by having the ability to attract and recruit talent. So what kind of talent do you think Fannie Mae will be able to recruit with the commander in chief of our great nation gunning for them? Better yet let's talk retention, what employee at Fannie Mae did not go in and update their resume yesterday? My final point, what kind of productivity do you expect from employees and management of a company that the President of the United States wants to shut down? Goals and aspirations drive most of us to strive for more and ultimately increase our productivity. It doesn't matter whether that goal is a management position, higher compensation, or a better office. The bottom line is Fannie Mae will not have any of those to offer any of its employees. So where is the incentive to keep working hard and boosting profits?
3. Last I heard we were still struggling to create jobs. I am not sure how many employees Fannie and Freddie Mac have combined but I imagine it is not a small number. So have we now recovered enough that President Obama believes he can start laying off thousands of jobs? If so, he has a lot more faith in this "recovery" than I do at the moment.
Let me clear a few things up. I am not an Obama hater. I am also not saying the dissolution or restructuring of Fannie Mae and Freddie Mac is not inevitable. But for the love of all that is fundamental about business can we not get paid back and maybe get our economy on track before making such radical comments? Here's a towel Mr. President, please wipe that egg off your face before your next speech.
