Today's subject is complicated, if not boring. Because my mailbox has been inundated with questions regarding the Fannie Mae and Freddie Mac debacle, I will address the subject as I understand it in the simplest of terms.

There are four players:

1) Fannie Mae (FNMA, which stands for Federal National Mortgage Association).

2) Freddie Mac (FHLMC, or Federal Home Loan Mortgage Corp.).

3) U.S. federal government.

4) U.S. taxpayers.

Fannie Mae was created in 1938 by President Franklin Roosevelt to make it possible for more Americans to buy homes. Banks could lend money to individuals and then sell those loans to Fannie Mae. By selling loans to Fannie Mae, banks were "repaid" immediately so they could lend money to other people. Once Fannie Mae bought these loans, it would turn around and sell the mortgages on the open market to investors as mortgage-based securities. That gave Fannie Mae money to buy more mortgages from local banks and mortgage lenders, and the cycle could repeat itself.

By 1968, Fannie Mae had grown tremendously and was converted from a government agency to a private corporation to remove it from the federal budget. Freddie Mac was created in 1970 to do the same thing as Fannie Mae, which increased the supply of money available for mortgages in the U.S.

Fannie Mae and Freddie Mac technically remained private corporations for the next 38 years. Both are shareholder-owned, but they always have been controlled by the government as government-sponsored enterprises. Over the years, both became behemoth-sized, bureaucratically run, financially corrupt monsters. Here's just one example: In 2006, Fannie Mae was fined $400 million in an $11 billion accounting scandal when senior executives were caught manipulating accounting records to collect millions of dollars in undeserved bonuses.

Things got so bad with both Fannie Mae and Freddie Mac that the government took them over Sept. 7. Rather than allow these quasi-private corporations to go bankrupt, the government bailed them out with hundreds of billions of dollars, at least $9 million of which will go to big fat severance packages for top executives, who are culpable in this mess and, I believe, acted criminally.

Should you care? Absolutely. It's going to be more difficult and cost more to get a home mortgage or to refinance a home because of all that's gone on in the mortgage-lending industry recently. More than that, however, is the fact that the government doesn't have any money of its own. All it has are our tax dollars. When the government bails out a company that's in trouble or pays bonuses to top executives or squanders money in some other bureaucratic way, you need to be aware that it's your money they're spending.

If you don't like the way your money is being managed, the way to make your voice heard is at the ballot box. Your vote remains one of your most precious and powerful tools. Use it well.

Mary Hunt is the founder of DebtProofLiving.com and author of 17 books, including "Debt-Proof Living." You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.
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