Who are Fannie Mae and Freddie Mac, and why do their problems matter to your small business?
Fannie Mae, the nickname of the Federal National Mortgage Association,and Freddie Mac, the Federal Home Loan Mortgage Association, are in trouble because of the subprime mortgage crisis. Last week the Federal Reserve announced that it would loan these entities money, if necessary. The press release explained their action:
This authorization is intended to supplement the Treasury’s existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets.
The federal government is considering bailing Fannie Mae and Freddie Mac out (with taxpayer money, of course), because if they fall, they could take the lending markets with them. Not a pretty picture.
FM 1 and 2 (”Thing 1″ and “Thing 2″) are “government-sponsored enterprises” (GSE’s). Fannie Mae is the older of the two entities, having been around since 1938. Freddie Mac was chartered in 1970, primarily to be a competitor to Fannie Mae. They both have essentially the same function (as I see it, and I’m no expert): to keep the flow of money going into mortgages.
So how does the news about the support of the Federal Reserve for Fannie and Freddie help your business? If you need a mortgage for a new building or other expansion, it will mean you might have a better chance of getting this money.
I have just two questions:
1. How do I get to be a “Government Sponsored Enterprise?”
2. If the government can devise creative acronyms like “Fannie Mae” and “Freddie Mac,” how come they can’t figure out creative ways to solve the current mortgage crisis?
Tags: baby boomers, Fannie Mae, Freddie Mac, mortgage financing, small businesses, subprime crisisRelated Stories
POSTED IN: Boomer Businesses in Difficult Financial Times, Finance, Politics
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