Fannie & Freddie vs. Mama & Daddy

Sarah Lawrence Senior Justin Lutz wonders why Fannie and Freddie get unlimited federal aid, when families like his struggle to make ends meet.

Capitalizing on the public distraction afforded by the holidays, the US Treasury quietly announced on Christmas Eve that it would abolish a former agreement that limited Fannie Mae and Freddie Mac to receiving no more than $200 billion in federal bailout funds. The $200 billion caps were set in 2008 when the federal government seized control of the mortgage giants in what is becoming an all-too-familiar trope of conservatorship—the legal process by which government acquires control of private corporations. The removal of these caps amounts to what is effectively a carte blanche for Fannie and Freddie, removing any capital limits to promise unlimited federal aid to the two. The announcement comes on the heals of a year in which Fannie and Freddie CEOs both received an annual salary of $6million in cold, hard cash—bonuses included.

As a first generation high school graduate and college student, I have felt first hand the impact of a public funds put to good use. I went to public school my entire life, and though I now attend the most expensive college in this country (Sarah Lawrence College), I do not pay a dime of the approximately $55,000 annual cost of attendance (save a miniscule federally-subsidized student loan). This is because Sarah Lawrence is a private institution that awards financial aid based entirely on familial income. In addition to the roughly $50,000 I receive in private Sarah Lawrence aid, I also receive a Pell Grant, FSEOG grant, and a federally subsidized student loan. Situating myself within the interstices of public and private aid, I have been able to afford myself a college education.

My father has been receiving federal Social Security Disability benefits for eight years, while my mother has been unemployed for over a year now. My family, at this point, relies entirely on the public sector for their subsistence. My father cannot escape this dependence, even physically, though my mother tries daily to find a job with only a middle school education in one of the most economically disparate periods in modern history, with Alabama’s unemployment approaching 11%.

Combing through the $787 billion dollar stimulus package signed into law by President Obama nearly one year ago, I found just under $60 billion to address Disability, Unemployment, and WIC (Women-Infants-Children) — all social programs that my family has utilized at one time or another. Here is a breakdown of stimulus funds pledged to said social services, according to the WSJ:

$500 million to WIC.

$26.9 billion for extension of jobless benefits for up to 33 weeks.

$8.8 billion for increase in weekly unemployment benefits by $25.

$14.2 billion for a one-time payment of $250 for retirees, disabled people, SSI recipients, railroad retirees and disabled veterans.

$4.7 billion $2400 of unemployment benefits will not be subject to federal income tax.

$2.9 billion to grants for states modernizing unemployment compensation coverage among low-wage, part-time and other workers.

$500 million for extra money for Social Security Administration to process disability and retirement claim backlogs.

$400 million to funding for states’ unemployment insurance and employment service agencies.

$200 million for grants to states with highest unemployment numbers for employment and training.

$21 million for Extension of unemployment compensation by 13 weeks for railroad workers.

This $60 billion is only a fraction of the aid promised to Fannie and Freddie while limits were still instituted. This is unacceptable.

Our nation is at a crossroads where it must demand a reevaluation of the neoliberal order, which has lead to our current economic environment — an environment that extolls the virtues of the free market and shames the recipients of government assistance with labels of “welfare queen,” among others. We must recognize that Algerism and American exceptionalism do not exclude the public sector — indeed, they are the crux of it. I only wonder when we will realize this; when the public sector will become a source of pride and not shame. Until then, I can only daydream about what Mama and Daddy could have done with that carte blanche placed firmly in the hands of Fannie and Freddie.

Justin Lutz is a Junior Fellow at the Roosevelt Institute.