In a move so surprising I had to check THREE times that I wasn’t reading The Onion. Obama is proposing to kaput Fanny and Freddie:
(Reuters) – President Barack Obama will propose overhauling the U.S. mortgage finance system in a speech on Tuesday, weighing in on a tangled and polarizing problem that was central to the devastating financial crisis in 2007-2009 and that continues to slow the economic recovery, the White House said.
Just another big government program in the waiting, right? Hardly:
Obama will propose eliminating mortgage finance entities Fannie Mae and Freddie Mac over time, replacing them with a system in which the private market buys home loans from lenders and repackages them as securities for investors, senior administration officials said.
Obama is suggesting that we demolish the government agencies and replace them with private market systems? But I thought that the practice of repackaging mortgages was immoral and the root of all evil?
The mortgage securitization process is deemed essential to the smooth flow of capital to housing markets and the availability of credit.
What has happened? I thought that it was evil Wall Street that brought down fire and brimstone upon us all? It was Wall Street bankers that took mortgages, packaged them and the resold them. Right?
The two enterprises don’t directly make loans, but buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors.
But how much influence do they really have?
Fannie and Freddie currently own or guarantee half of all U.S. mortgages and back nearly 90 percent of new ones.
Holy shit that’s a lot of loans.
It’s long overdue, to be sure, that Fannie and Freddie are shut down and the government stop its subsidizing of loans to folks who have no hope of paying them back. For me, this just reinforces the fact that the government policies and agencies were the primary driving force behind the housing collapse.
Now, to see who may or may not be right, watch who approves of this approach and watch who does not approve of it. The first democrat that defends Fannie and Freddie is the first to be guilty of those policies I have been criticizing this whole time. And the first republican who opposes the President is the most guilty of simply opposing every idea he has.