258 PART ThRee • InsTITuTIons oF AmeRIcAn GoveRnmenT
The auto companies and AIG had announced plans to do likewise. In October 2012, the
Congressional Budget Office stated that TARP’s final cost to the taxpayers was $24 billion.The Government-sponsored enterprise. An additional type of corporation is the
government-sponsored enterprise, a business created by the federal government itself,
which then sells part or all of the corporation’s stock to private investors. Until 2008,
the leading examples of this kind of company were the Federal Home Loan Mortgage
Corporation, known as Freddie Mac, and the Federal National Mortgage Association,
commonly known as Fannie Mae. Both of these firms buy mortgages from banks and
bundle them into securities that can be sold to investors. When the housing market col-
lapsed, so—eventually—did Freddie Mac and Fannie Mae.
Investors had always assumed that the federal government backed the obligations of
the two enterprises, even though the government had never issued an explicit guarantee.
In September 2008, the implicit guarantee became real when Treasury secretary Paulson
placed the two mortgage giants under a federal “conservatorship” and pumped billions in
fresh capital—also provided by the taxpayers—into them through purchases of preferred
and common stock. In contrast to the TARP investments, the sums invested in Freddie Mac
and Fannie Mae have been paid back slowly. As of mid-2013, they still owed $51 billion
of the $187 billion that the government had invested in them.sTAFFInG The BuReAucRAcy
There are two categories of bureaucrats: political appointees and civil servants. As noted
earlier, the president can make political appointments to most of the top jobs in the federal
bureaucracy. The president also can appoint ambassadors to foreign posts. All of the jobs
that are considered “political plums” and that usually go to the politically well connected
are listed in Policy and Supporting Positions, a book published by the Government Printing
Office after each presidential election. Informally (and appropriately), this has been called
the “Plum Book.” The rest of the national government’s employees belong to the civil
service and obtain their jobs through a much more formal process.Political Appointees
To fill the positions listed in the Plum Book, the president and the president’s advisers
solicit suggestions from politicians, businesspersons, and other prominent individuals.
Appointments to these positions offer the president a way to pay off outstanding politi-
cal debts. Presidents often use ambassadorships to reward individuals for their campaign
contributions. But the president must also take into consideration such things as the can-
didate’s work experience, intelligence, political affiliations, and personal characteristics.The Aristocracy of the Federal Government. Political appointees are in some sense
the aristocracy of the federal government. But their powers, although they appear formi-
dable on paper, are often exaggerated. Like the president, a political appointee will occupy
her or his position for a comparatively brief time. Political appointees often leave office
before the president’s term actually ends. In fact, the average term of service for political
appointees is less than two years. As a result, most appointees have little background for
their positions and may be mere figureheads. Often, they only respond to the paperwork
that flows up from below. Additionally, the professional civil servants who make up the
permanent civil service may not feel compelled to carry out their current chief’s directives
quickly, because they know that he or she will not be around for very long.LO3: Explain how government
employees are hired and how they
are administered.
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