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VOL. 38 | NO. 12 | Friday, March 21, 2014

Fannie, Freddie helped turn economy around

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“By the end of this quarter, Fannie and Freddie will have paid the government $203 billion, slightly more than the $187.5 billion they received from the government in their 2008 bailout. But 2008 was six years ago. Had the government charged shareholders a very reasonable 10% interest on the loan, F&F would owe another $93 billion. So, let’s talk when F&F’s total payments to Uncle Sam total $281 billion.”

The writer, Elliott Eisenberg, is referring to Fannie Mae (FNMA) and Freddie Mac (FMCC).

Eisenberg writes the blog daily Graphsandlaughs, for which you may subscribe by writing to him at Elliot@graphsandlaughs.com. I highly recommend the subscription.

Eisenberg is a captivatingly hilarious speaker and a brilliant man. But he is joining a growing number of economists and politicians alike who are piling on Fannie and Freddie.

When the government decided to bail Fannie and Freddie out, you might recall, there was great criticism from many who felt that the institutions were in hopeless condition and should be eliminated.

Yet, according to Eisenberg and others, they have repaid the debt of more than $187.5 billion. While the $15.5 billion surplus, or interest, is “only slightly more” than the “amount they received” according to Eisenberg, with a billion here and a billion there, as the saying goes, pretty soon you are talking about some real money.

And while Fannie and Freddie were repaying the debt, those funds were being utilized to prop other more highly regarded entities that were not faring as well as the Mae and Mac pair.

It would be difficult to imagine how the recovery would have progressed without the housing market’s resurgence. If not for the guarantees offered by Fannie and Freddie, and now news that the Congress may be shuttering the agencies, has their stock reeling and investors worried. Look out if they are closed.

In another e-mail, Eisenberg wrote: “There is a billion dollar prize for correctly predicting all 63 games in the NCAA College basketball tournament. Assuming you can guess the winner 70 percent of the time, which has never been accomplished, your chance of winning is one in 10 billion.

Lowering your chances of prediction to 60 percent, which is positively superhuman, your chance of winning falls to one in (one) hundred trillion! Good Luck!”

The chances of Congress closing Fannie and Freddie is much greater. It seems that Congress is always at a stalemate or gridlock when there is helpful legislation on the floor, yet they can pass other legislation with ease. As Jim Cooper often sighs and says, “Why do you think they call it Politics?”

As of this writing, the temperatures remain low and the spring thaw is not yet upon us. Even if the mercury rises, this week will be slow as the schools are on spring break, forcing the home shoppers to tend the children.

Sale of the Week

The sale of the week is 4513 Price Circle road in the Hillwood Estates section of Hillwood, just across Harding road from Belle Meade. From outward appearances, the design would be that of a ranch style home. But listing agent Bill Bainbridge is quick to dismiss that evaluation, stating in the remarks that this is “not a typical ranch floor plan.”

All buyers want to know why the sellers are selling. The buyers want the situation to be beneficial to them and hope that there are no fatal flaws with the house or any other negative mojo that could curse them and their children and their children’s children.

Bainbridge, being the seasoned pro that he is, allays those fears: “(The) sellers (are) relocating and hate to leave this place!”

A true real estate novelist. And speaking of real estate novelists, did you happen to catch Billy Joel? He was frighteningly good.

Bainbridge continues: “New kitchen with island and breakfast bar overlooking large den with wood burning fireplace; nice hardwoods; great utility room/mudroom, nicely sized bedrooms plus three full baths.”

He didn’t say “nice size rooms,” and that’s appreciated. I hate that phrase.

Then for the coup denouement, he added “secret” art studio in the basement. Everyone loves a secret, and Bill Bainbridge had one.

The sale closed 15 days after the house was listed, and the buyer paid more than list price. It was listed for $419,000 and sold for $425,000. D.J. Farris from Fridrich and Clark represented the buyer, who paid $160 per square foot for the 1,654-square-foot home.

Richard Courtney is a partner with Christianson, Patterson, Courtney and Associates and can be reached at richard@richardcourtney.com.