Taxpayers mooned by Fannie just natural result of private parts going public

Guambat began to take note a couple of years ago that the Privateers, who were some of the chief architects of the credit crunch by buying up public companies, loading them up with debt and creaming the riches off their balance sheets while selling the debt and debt loaded companies to our pension funds, were beginning to reverse the "going private" trend by selling themselves off to the public.

Earlier this year, in reaction to news that the Blackstone Group was planning to take its Privateers public, Guambat recalled the old adage "when a man with experience meets a man with money, the man with experience ends up with the money and the man with the money ends up with an experience."

The movement picked up speed last year but the pace is truly in the race now, with the biggest of the going-public-Privateers reaching across the aisles to shake hands and congratulate themselves at the Water Cube during the recent Beijing Olympics.

So, Hank Paulson, who, as a Goldie Alumnus, has walked the same paths with many of the Privateers, determined to "nationalize" Fannie Mae and Freddie Mac, appears to simply be following in their steps, taking a page off their play book. Nothing much more complicated, nor less cynical, than that.

But Fannie was not always the private lass we think of her. She actually started out very much the public servant of the Roosevelt New Deal, and in that respect is simply returning to her roots, where she is now rooting the public once again.

Bloomberg provides the history:

Fannie Mae's Demise Rooted in the Swinging '60s, Commentary by Amity Shlaes

Fannie can be viewed as a flower child whose fragility was evident as far back as 1968.

The story of Fannie, of course, begins earlier, with President Franklin Roosevelt. In the Depression, Roosevelt formatted the modern mortgage and supplied desperately needed capital to strapped homeowners via the Home Owners Loan Corp. Later, he established the Federal National Mortgage Association, later Fannie Mae. But these New Deal moves didn't set the stage for the current crisis because the relationship between the new entities and government was clear: They were part of it.

Today's troubles began when President Lyndon Johnson was having a hard time delivering on his guns-and-butter promise. In January 1968, LBJ proposed to Congress both a war surtax and a change in government's bookkeeping. The Federal National Mortgage Association would move off-budget, nominally reducing federal borrowing. The new mortgage company, the New York Times reported, would be "wholly privately owned.''

But not entirely private. For here is where Fannie's career as a swinger -- swinging between public and private, that is -- took off.

You'll want to read the article to get her take on what happens to off-balance sheet social entitlements.