So the US property market is in big doo-doo. I’m no economist, but after watching a few news reports, I’m getting the general message that the American economy has tanked, home owners can’t make their payments, mortgages are being forfeited and the companies that gaily gave credit to every shmo who came along are now going belly up.
That much is old news. But now two companies who collectively own or guarantee about half of all the home loans in America (totaling $5.4 TRILLION) are effectively bankrupt. That’s a very big problem for the American economy and the government has had to step in and use tax payers’ money to keep the two companies afloat. The cost is estimated in the hundreds of billions. And you think we’ve got problems with Eskom?
Now, all of this is worrying. After all, if the precarious pyramid scheme that is the American economy comes crashing down, we’re all going to feel the effects. As one commentator said, if these two companies go down, it will be like 1929 all over again. But that’s not what has prompted me to write this post. Oh no, I’ve got much bigger fish to fry.
You see, the names of these two companies are ‘Fannie Mae’ and ‘Freddie Mac’. I mean, come on. ‘Fannie Mae’ sounds vaguely erotic and Freddie Mac sounds like a school janitor. The two largest players in the American home loan system appear to be named after a couple of redneck kissing-cousins who live in the Appalachians. How can you take a company seriously when they’ve got names that come out of the Dolly Parton songbook?
It’s even worse than that. As if Fannie Mae and Freddie Mac still sounded too corporate for the folksy, down-home American public, they felt the need to colloquialise the companies even further; perhaps in a vain attempt to make the all-mighty power wielded by these two financial leviathans seem less threatening. And thus ‘Fanny and Freddie’ have come to preside over the US housing market, like two innocuous old farts from a Norman Rockwell painting. Aw shucks.
I was so intrigued, I started wondering who were Fannie Mae and Freddie Mac? Where they real people, like Colonel Saunders or Ronald McDonald? Or were they disingenuous names given to monolithic corporations to lull the public into a state of unquestioning obedience?
Neither, as it turns out. According to the omniscient god of Wiki, the official names of these Government Sponsored Enterprises (GSE’s) are much more forbidding: The Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Now, if you look very closely, you’ll see that the familiar form ‘Fannie Mae and Freddie Mac’ are very imaginative interpretations of the two acronyms listed above.
There are also a couple of other Government Sponsored Enterprises (a concept I don’t pretend to fully understand) and they too have cutsie-pie names. There’s good old Ginnie Mae – the Government National Mortgage Association (GNMA). And don’t forget about sweet little Sallie Mae – the Student Loan Marketing Association (SLM). Ain’t that a purdy family?
But there’s a sinister edge to this American Gothic family portrait. Initially formed in the aftermath of the Great Depression as nationalised, government-run funding schemes that aimed to make credit more accessible for communities in need. Since the 1960s, Fanny, Freddy and the little un’s were privatised to a greater extent. Since then, they have been buying and underwriting home loans which they then exploit for the profit of their shareholders. This worked in the past because prices kept rising. Now the bottom’s falling out of the property market and they have lost billions of dollars. Oops.
I suppose there’s something quintessentially American about naming conventions that seek to diminish the power of corporate behemoths by baking them in apple pie. In South Africa, our heads might occasionally reel with the dozens of acronyms that pepper our political landscape. Nowadays, it’s hard to tell our NGOs from our DWAFs. But at least we give them the dignity of Capitalised Initials. Meanwhile, back on the ranch, Fannie and Freddie are up the creek and the apple pie is going vrot. IMHO.
[Originally posted 08/09/2008]