As we all are aware, the US government had to make quick payday loans available, not to middle class consumers who had a sudden emergency expense, but to the mortgage and consumer credit giants Fannie Mae and Freddie Mac, in order to save them from bankruptcy. Then more funds were given in quick loans to recapitalize those companies and to make consumer credit readily available so that business could start rolling again. Fannie Mae and Freddie Mac both were brought to the brink of collapse in the midst of the subprime mortgage loan scandal that rocked the U.S. financial world to its core and worsened the recession that has been setting in since December of 2007.
House Oversight Committee Blasts them for Irresponsibility in Investment
At a hearing in Washington D.C. on Tuesday, December 9th, House Oversight Committee Chairman, Henry Waxman, let them have a piece of his mind after testimony from some of the former executives of the company was given at the capitol, along with other committee members who had their two cents worth. The companies backed their company cash by basically buying up debt, almost like a loan shark, in order to have a steady flow of cash coming in from the borrowers of the subprime mortgages’ payments. When the payments decreased, or stopped coming in altogether, the amount of operating cash that the company had on hand to use in lending to consumers for other loans, such as other mortgages and loans to businesses, decreased dramatically. As the market for housing contracted over the summer, the income of the company continued to decline until both were about to declare bankruptcy.
Waxman called the decision to lend money for mortgages with money from other mortgages that were less reliable irresponsible. This was after both companies’ own risk managers had advised them not to undertake such a venture, since the security of doing so was not viable. See, the way it worked was that a lot of people had a particular type of mortgage, called an Alt-A mortgage. Alt-A mortgages are lent to borrowers with more debt, lower credit scores, or people who wanted more money in financing than a property was worth. These loans are far riskier than other mortgage loans, because they are made outside of the normal guidelines for what are 
considered viable mortgages. What the executives at Fannie Mae and Freddie Mac did was basically buy all of these mortgages from other companies, and then raised the interest rates in order to squeeze more cash out of people that shouldn’t have probably had a mortgage in the first place in order to make a few quick bucks, so they could keep lending. Then, when these people defaulted, the money stopped rolling in, and things began to go circle down the drain. Then, the federal government had to step in to bailout these companies to keep them from failing and inject capital so they could get back to work. So we see then, that responsible financing is a skill that should be taught to not only us the consumers, but also to Wall Street CEOs apparently. Most quick payday loans customers know responsible financing. Perhaps Yale and Harvard should be rescinding their MBAs?
Responsibility is Key in your finances
Let this be a lesson to all of us. You cannot put your finances in a risky situation in order to turn a quick buck. You have to plan adequately, budget, save, and find ways to spend less, responsibly. Also, remember that a responsible option in the wake of a sudden change in fortune is needed as well, and trying to get a wacky venture that no one really understands is not the way to go if you need some bailout funds, but quick payday loans from a reputable vendor is far and away a better option.
