Who benefits from the ways we protect Fannie and Freddie's shareholders? The Wealth Concentration Tables on wealthandwant.com wil give you a pretty good notion. Unless, of course, you think for some reason that Fannie and Freddie's shares are held strictly by poor widows and orphans in the bottom 90% of the wealth spectrum, different from other equity holdings. [Cut to the chase: the bottom 50% of us hold 2% of the value. The next 40% of us hold 26% of the value. The top 10% hold the remaining 72%]
Consider also the advice that a prudent investor should not be concentrated in a single stock or sector, particularly if one is employed in that sector, as the employees of Enron learned very publicly not all that many years ago.
So whose portfolios are we protecting when we give gifts from the commons to the shareholders of Fannie and Freddie? The poor widow whose advisor suggested she invest in those two stocks? Right.
The triennial Survey of Consumer Finances, conducted by the Federal Reserve Board, shows that in 2004, individual stock ownership was divided as follows:
Bottom 50% of us: 0.6%
Next 40% of us: 10.3% Bottom 90% 10.9%
Next 5% of us: 10.1% Bottom 95% 21.0%
Next 4% of us: 28.2% Bottom 99% 49.2%
Top 1% of us 50.9%Stocks totaled $3.7 trillion in the 2004 SCF [table 1, line 8]
Stocks might also be held via Non-money Market Mutual Funds:
Bottom 50% of us: 0.7%
Next 40% of us: 18.2% Bottom 90%: 18.9%
Next 5% of us: 10.7% Bottom 95%: 29.6%
Next 4% of us 32.7% Bottom 99%: 62.3%
Top 1% of us 37.6%
Mutual Funds totaled $3.1 trillion in 2004 -[table 1, line 9]
Finally, stocks might be held in retirement assets -- 401(k) accounts, IRAs, etc:
Bottom 50% of us: 3.4%
Next 40% of us: 38.3% Bottom 90%: 41.7%
Next 5% of us: 19.6% Bottom 95%: 61.3%
Next 4% of us 25.2% Bottom 99%: 86.5%
Top 1% of us 13.6%
Retirement accounts totaled $6.8 trillion in 2004 [table 1, line 10]
Totaling up the three categories, we find:
Bottom 50% of us: 2.0%
Next 40% of us 26.0% Bottom 90%: 28.0%
Next 5% of us 15.0% Bottom 95%: 43.0%
Next 4% of us 27.7% Bottom 99%: 70.7%
Top 1% of us 29.3%
Stocks, Mutual Funds and Retirement Assets totaled $13.6 trillion in 2004 [table 1, line 32]
This omits pension funds ... which cover perhaps 1/3 of households -- and probably not much more evenly.
Privatizing gain and socializing the risk or loss. Is this what we should be supporting?
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