The Jan. 2 editorial “A necessary fox for this henhouse?” promoted the shibboleth that Fannie Mae and Freddie Mac “collapse[d] under stress at great taxpayer expense.” As documented in numerous lawsuits, both assertions are untrue. They did not “collapse”; what was billed as a “bailout” was actually a stickup. As for the “great taxpayer expense,” as of this writing, Uncle Sam has earned more than $100 billion on its so-called investment, unquestionably his most profitable venture since the Louisiana Purchase.
The editorial stated that before the so-called bailout, “stockholders absorbed all the profits and taxpayers were on the hook for excessive risk-taking.” This is also untrue. As their independent auditors attested for more than 50 years, stockholders absorbed all losses as well as gains. The only losses they did not absorb were those put on the books by the government itself after it seized control and ordered the companies’ accounting staffs to book billions in highly questionable, noncash charges. Adding insult to injury, when those “cookie jar” accounting entries had to be reversed four years later, instead of allowing Fannie and Freddie to use the resultant profits to rebuild their capital accounts, the government took it all for itself, leaving them with virtually no capital.
Gary Hindes, Centreville, Del.
The writer, chairman of the Delaware Bay Co., is a shareholder of Fannie Mae and Freddie Mac.