The History Of Fannie Mae


Today’s subject is complicated, if not boring. Because my mailbox has been inundated with questions regarding the Fannie Mae and Freddie Mac debacle, I will address the subject as I understand it in the simplest of terms.

There are four players:

1. Fannie Mae (Federal National Mortgage Association or FNMA)

2. Freddie Mac (Federal Home Loan Mortgage Corp. or FHLMC )

3. U.S. federal government

4. U.S. taxpayers

Fannie Mae was created in 1938 by President Franklin Roosevelt to make it possible for more Americans to buy homes. Banks could lend money to individuals and then sell those loans to Fannie Mae. By selling loans to Fannie Mae, banks were “repaid” immediately so they could lend money to other people.

Once Fannie Mae bought these loans, it would turn around and sell the mortgages on the open market to investors as mortgage-based securities. That gave Fannie Mae money to buy more mortgages from local banks and mortgage lenders, and the cycle could repeat itself.

By 1968, Fannie Mae had grown tremendously and was converted from a government agency to a private corporation to remove it from the federal budget.

Freddie Mac was created in 1970 to do the same thing as Fannie Mae, which increased the supply of money available for mortgages in the United States.

Fannie Mae and Freddie Mac technically remained private corporations for the next 38 years. Both are shareholder-owned, but they always have been controlled by the government as

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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