Government Influence and the Failure of Fannie Mae and Freddie Mac

In 2008 two government-sponsored enterprises, Fannie Mae and Freddie Mac, were placed into conservatorship due to insolvency. The financial bailout of the two publically traded corporations came at the expense of the American tax payer. This study investigates the relationship between direct and indirect government influence and the increasing risk taking of Fannie Mae and Freddie Mac from the late 1990’s through their conservatorship in 2008. As government-sponsored enterprises Fannie Mae and Freddie Mac have many special advantages that other publically traded companies did not possess. These advantages allowed Fannie Mae and Freddie Mac to increase their profitability. Theoretical literature regarding Congress and the bureaucracy suggests that the actions of bureaucrats can be linked to the preferences of Congressional members because bureaucrats are responsive to potential threats or perceived threats from the legislature. This theory is applicable to Fannie Mae and Freddie Mac, and is used to explain why the government was able to directly and indirectly influence the government-sponsored enterprises. Overall this investigation has determined that the United States government pursued a clear mission that determined to increase the availability of housing to all Americans, specifically to low-income and under-served individuals, through the use of the government-sponsored enterprises. Despite this link there is no conclusive data to show that the pursuit of this housing mission led Fannie Mae and Freddie Mac to operate in riskier business segments. This study has also found that motivation regarding profit-seeking and compensation structure provide a more plausible explanation for why the government-sponsored enterprises began to engage in riskier business practices that led to their insolvency.

Studying the Roles of Nonprofits, Government, and Business in Providing Activities and Services to Youth in the Phoenix Metropolitan Area

The article addresses the questions, What do children in urban areas do on Saturdays? What types of organizational resources do they have access to? Does this vary by social class? Using diary data on children's activities on Saturdays in the Phoenix-Mesa-Scottsdale metropolitan area, the authors describe the different types of venues (households, businesses, public space, associations, charities, congregations, and government/tribal agencies) that served different types of children. They find that the likelihood of using a charity or business rather than a government or tribal provider increased with family income. Also, the likelihood of using a congregation or a government facility rather than a business, charity, or household increased with being Hispanic. The authors discuss the implications for the urban division of labor on Saturdays and offer research questions that need further investigation.