Bill Miller, The Dunce

Bill Miller/Freddie Mac

Legg Mason's Bill Miller's continued investment in Freddie Mac even in recent days appears to be the act of a desperate man. Like a loser at the casino doubling down in hopes of recouping his losses. Why anyone would have continued to hold or invest in Fannie Mae or Freddie Mac when the the Office of Federal Housing Enterprise Oversight (or OFHEO), issued its 211 page report in 2004, wherein it concluded that Fannie Mae had a coprorate culture where "earnings manipulation" was "pervasive and willful" there were lax controls, perverse incentives, unjust bonuses. Then in May of 2006 the Securities and Exchange Commission (SEC) accused Fannie Mae of fraud and other misdeeds. Without admitting or denying wrongdoing, Fannie agreed to a $400 million settlement. That's right a FOUR HUNDRED MILLION DOLLAR ($400,000,000.00) fine. This was just over two years ago. Does this sound like a company anyone in their right mind would invest money in? Now that the chickens have finally come home to roost. It will be interesting to see if any Fannie Mae or Freddie Mac executives are indicted and or imprisoned now that Fannie Mae and Feeedie Mac seized by the U.S. Government. Probably not because these two companies have been run by executives and boards who were politically connected and appointed. When the average American taxpayer finds out how big this Fannie Mae and Feddie Mac financial debacle is and the fact that it got progressively worse since the OFHEO report in 2006, they will be outraged. The idea that our government is going to guarantee the bonds that were floated by Fannie Mae and Freddie Mac that back billions of dollars if not trillions of dollars of non-performing mortgages that were flipped to Fannie Mae and Freedie Mac by Wall Street is unconscionable. It is yet another example of how our government allowed Wall Street to privatised profits from public companies to its executives through bonuses, stock options, director fees etc. and now that these public companies financial schemes are collapsing our government has decided to socialize the losses to American tax payers. Privitizing profits socializing losses. That's the new game the U.S. Government is playing. Unfortunately for Legg Mason and/or Bill Miller the government is only going to save the bond holders.