Is the Bush Administration Trying to Take Down Fannie Mae?

It all came back to Friedman's single-minded message: Everything went wrong with the New Deal. That's when so many countries "including my own, got off on the wrong track" … Friedman's war on the "welfare state" and "big government" held out the promise of a new font of rapid riches -- only this time, rather than conquering new territory, the state itself would be the new frontier, its public services and assets auctioned off.

--Naomi Klein, The Shock Doctrine

"I love my grandfather," CNN chatterhead Glenn Beck complained on his eponymous show, "but I just want to slap him across the face for liking FDR. I think that was one evil son of a bitch."

Beck's complaint was echoed by his guest for the segment, supply-side economist Stephen Moore, one-time president of the Club for Growth, fellow at think tanks like the Cato Institute and Heritage Foundation, author of Bullish on Bush and now a Rupert Murdoch employee on the Wall Street Journal's editorial board. Together, they tag-teamed the history books so hard on Roosevelt and the New Deal that one could have been forgiven for forgetting that the four-time president's policies not only carried America through the Great Depression, but defeated both Hitler and Mussolini to score a geopolitical hat trick. In Beck and Moore's rhetorical attacks, FDR comes out looking like the very fascists he defeated, one who actually lengthened the Great Depression in an attempt to "nationalize," as Beck asserted, everything in sight and screw honest, hard-working businessmen out of their deserved paydays.

Of course, Moore and Beck are not alone: Naomi Klein's stunning The Shock Doctrine, a deeply researched and scathing condemnation of Milton Friedman's free-market ideology (and ideologues), catalogs neoconservative attempts over the last several decades to unwind everything FDR's New Deal has accomplished. Taken together, the attacks on FDR share one major goal: To privatize what is left of the New Deal and undermine its programs to help the poor and unlucky of the United States navigate their way into the middle class.

The Federal National Mortgage Association (FNMA), more commonly known by its portmanteau nickname Fannie Mae, is one such government entity created by the New Deal, initially to inject liquidity -- or cold, hard cash -- into the mortgage market. That is, until 1968, when it was converted into a private corporation that ceased to guarantee loans made by the government. Since then, it has existed in a nebulous state otherwise known as a government-sponsored entity (GSE), like its smaller GSE-in-arms Freddie Mac, which also buys and pools loans on the secondary market to package them into mortgage-backed securities for sale to investors on the open market. Even though Fannie and Freddie receive no direct funding or backing by the government, the loans that they securitize have the implicit support of the U.S. government behind them, thereby making it easier to land favorable lending rates, buy prices and what passes for financial security in the capital and mortgage markets.

And if that sounds like a bureaucratic labyrinth to you, that's because it's supposed to. Good luck navigating it. But the tangled acronyms and economic jargon still cannot hide one major problem: The GSEs are neck-deep in the housing meltdown and sinking fast.

As of last report, Fannie and Freddie were holding upwards of $4.8 trillion in mortgage-backed securities, financial instruments at the dark heart of our current housing crisis. And because many of those securities are built up of nothing more than debt, one could argue that they're holding onto a whole lot of nothing at all. Which, of course, is the realization that the markets came to over the last several months, when mortgage-backed securities collapsed like a house of cards, taking the American economy, and others it supports, down the rabbit hole.