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Home Front: Politix
Update: Fannie Mae and Freddie Mac Invest in Lawmakers
2008-09-12
Fannie Mae and Freddie Mac's (Heavy) Hand in Government Affairs

This week's government takeover of Fannie Mae and Freddie Mac marked the shutdown, apparently, of one of Washington's most robust influence machines. Together, the two mortgage buyers spent nearly $200 million on lobbying and campaign contributions over the last two decades, throwing their weight around more like corporations than the government-sponsored enterprises they were. And when Fannie and Freddie faced collapse, those in government were there to help, ironic considering that for so many years the companies' political strategy was to avoid government involvement in their business. So how much did Fannie and Freddie's contributions and lobbying contribute to Congress's hands-off approach? That's hard to determine, but we do have hard data to measure the companies' investment in politicians. Not only have more than 350 current members of Congress collected a total of $4.8 million in campaign contributions associated with Fannie Mae and Freddie Mac since 1989, but 28 lawmakers had up to $1.7 million of their own money invested in the companies last year.
Posted by:3dc

#11  I've got all my money tied up in rare postage stamps from Guinea Bissau - all $48.27 of it.
Posted by: Old Patriot   2008-09-12 23:45  

#10  Past Performance is No Guarantee of Future Results is on most printed investment advice I've read. Everyone seems to ignore it.
-- A 30 year investment horizon is nice for people who expect to live longer than that. I don't. It is a nice debating point for people who profit from selling financial instruments.
-- The levels of corruption and self-dealing in many publicly held companies have not fully surfaced.
-- I did not cash out of my retirement funds early. I just sold my S&P 500 index investments & shifted the $ to equally protected CDs and Tbills, all within my retirement funds which remain untouched and untaxed. If other investments look better in the future, I'll buy some. I won't be buying anything contaminated with housing or financial institutions for a few years, at least.
Posted by: Anguper Hupomosing9418   2008-09-12 22:59  

#9  I'm afraid our amns retirement fund is going to suffer due to bias confirmation via some nifty data mining.

You cherry picked your years of comparison. You chose a ten year period (for shorter than most anyones investment horizon) with a bastard of a bear market. Now go back and check the ten years before that. Or better yet, check it against a more normal 30+ year time horizon.

From 1972-2005 the S&P has had an annualized return of 12.7%. Comparing that with bond returns and the huge penalties from cashing out of retirement funds early......
Posted by: Mike N.   2008-09-12 21:35  

#8  Looked. Nope.
Posted by: .5MT   2008-09-12 17:03  

#7  30% Damn, I gotta go look at muh books!
Posted by: .5MT   2008-09-12 17:03  

#6  An interest rate of -1% trumps a capital loss of 30% every time.
Posted by: Anguper Hupomosing9418   2008-09-12 16:59  

#5  over the last 10 years or so -- the S&P 500 has underperformed simple things like Tbills & CDs.

Thar u go! Excellent advice. Don't be annoyed by a slightly negative interest rate, it's the best you can get.
Posted by: .5MT   2008-09-12 16:53  

#4  -- There is a school of thought for investors saying things like the S&P500 index funds were good basic investments for the long-term, due to very low expenses. This was probably good advice for a stable economy, however, this has not panned out over the last 10 years or so -- the S&P 500 has underperformed simple things like Tbills & CDs.
--- I could see the real estate crisis coming over a year ago. When I saw FNM & FRE in the S&P500 along with financial institutions deeply implicated in the upcoming collapse, I bailed in 8/2007 & sold all my 401X & IRA stock mutual funds, saving myself quite a bit. I had lost money with the dot com bust & was determined not to let it happen again.
We're in for a very bumpy ride. Make sure your bank deposits are under the FDIC limit & diversify your bank accounts.
Posted by: Anguper Hupomosing9418   2008-09-12 14:45  

#3  The only thinking index fund managers are supposed to do is to rebalance the stock holdings as company stock values increase or decrease, or companies are added or subtracted from the index. I'm just glad the management team that got the organizations into trouble -- and spent so much of the profits on lobbying -- are gone. Despite their golden parachutes, we can hope they'll be prosecuted for their demonstrated malfeasance.
Posted by: trailing wife    2008-09-12 13:42  

#2  The market cap on the two companies has been shrinking for months, if not years. The damage to stockholders is a fact on the ground. Part of the reason for the government intervention was to maintain the two companies' required capitalization by injecting government money via new preferred-stock purchase.

If our mutual fund managers were invested in those dogs, it's our own damned fault. I'll have to see what kind of damage my 401k took in the next quarterly report. Hopefully not too much. I don't pay too much attention to the precise investments of my mutual funds, but since I tend more towards utility, energy, index, and international growth funds, I can hope that the damage was limited to the index funds.
Posted by: Mitch H.   2008-09-12 09:03  

#1   Many people had portions of their retirement plans invested in Fannie & Freddie, e.g. S&P500 index plans, and so lost a portion of those savings when the two stocks fell to zip. The two companies were dumped off the S&P500 2 days ago without ceremony. They've been a fiasco for a very long time.
Posted by: Anguper Hupomosing9418   2008-09-12 02:39  

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