The conservatorship of Fannie Mae (FNMA) and Freddie Mac (FHLMC) is stunning. Of course all could see this coming months ago, but the realization that the federal government has placed Fannie Mae and Freddie Mac under their guardianship is simply astonishing. When the director of the Federal Housing Finance Agency, James B. Lockhart made the announcement on Monday, an eerie feeling crept over me. This is not capitalism. Fannie and Freddie were both privately run government sponsored enterprises (GSEs), created by the United States Congress. Is it a wonder why they are failing?

      The truth of the matter is Fannie Mae and Freddie Mac have been heading towards failure for a long, long time. For years Fannie and Freddie were inflating their numbers to reach their budget goals. This was done to initiate bonus incentives for top executives. Accounting errors for FNMA of $6.3 billion were discovered earlier this decade. Multi-millions of dollars in bonuses were fraudulently awarded to these top executives, bonuses that never should have been. So, where are the CEO's of Fannie and Freddie now? They are certainly behind bars where they belong right? The answer simply put, is no, they're not. Franklin Raines was the CEO from 1999 through 2004 while these numbers were immensely over inflated. Prior to being a CEO, he was Bill Clinton's director for the U.S. Management and Budget. His predecessor at Fannie Mae was James A. Johnson. He recently headed Obama's search team for Vice President until the Countrywide scandal broke earlier this year. As CEO of Fannie Mae, they had accounting errors in 1998. Why are they not incarcerated with other top crooked executives? Is it possible their political connections have kept them safe? 

      As much as I hate to see (and I cringe as I type this) a government take over, the fact is Fannie and Freddie are just too big to let fail. The ramifications of them buckling would be felt worldwide. Confidence and trust in dealing financially with the U.S. internationally would suffer. They clearly need to be restructured and downsized. Now we all know the government is excellent at managing finances and downsizing, as seen by the projected nearly $500 BILLION, 2009 budget deficit. That is not including the trillion plus dollars Fannie and Freddie are going to heap on top of that. Is fiscal responsibility dead? This is unbelievable, where is this money going to come from? Maybe the government will just print more money or borrow it from China. In this complicated mess, the answer is yet again simple, we the tax payers will be paying for the bailout. 

      Could you imagine every small business being bailed out if they started to falter? What about the big 3 automakers if they start to collapse. What's next? Where and when will it end? This is extremely dangerous territory, with no sign of a solution in sight. Somehow the bleeding needs to be stopped, but I just don't see the conservatorship of Fannie Mae and Freddie Mac as anything more than a band-aid over an amputation. I'm afraid this marriage will end in a bitter divorce.