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.
As you know, Fannie and Freddie didn’t cause the crisis in the 2000s (which was created by the big banks and lack of regulation by the government on the private market – proof markets need regulation), but it is time they go. The problem is not just the securitization of mortgages into bonds, but the way the lack of regulation on that and on loan creation allowed the big banks (some of them failed because of this, to be sure) to abuse the system and make obscene profits with the money of investors who thought they were getting AAA bonds. That won’t be repeated. New regulations are in place – not as tough as they probably should be, but tough enough to avoid a repeat. With real regulations in place its better to have this be done in the private sector. Yet it was primarily the private sector with greed and lack of regulation that caused the housing bubble and subsequent crisis.
As you know, Fannie and Freddie didn’t cause the crisis in the 2000s (which was created by the big banks and lack of regulation by the government on the private market
Scott, Scott, Scott – you are letting dogma interfere with reality. The government drove the whole thing in a desire to be able to say that they were able to increase home ownership.
Democrats did this because they claim they wanna help poor people. Republicans did this because “Home Ownership” is the second most predictive trait that votes republican. The first best predictor is holding a job in the private sector.
I am shocked that Obama is trying to take these down.
You are correct on the proximate cause of the mortgage crisis.
“Banks made politically motivated dud loans, then begged the government for ways to unload those loans on some other sucker.
And why did they make politically motivated loans? Partly it was that the CRA mandated politically motivated loans. Partly it was political correctness. The regulators demanded not merely politically correct behavior, but also politically correct belief, demanded holy zeal for the true faith, and got it.”
Also, let’s not forget this gem:
“A government reinsurer of mortgage securities could backstop private capital in a crisis, the official said.”
In other words, nothing changes — political pressure to make politically correct mal-invenstments. When it goes south, no problemo — George Soros gets his bailout. I’m guessing the primary holder of these REITs will be the Fed and public pension funds since private investors aren’t willing to put their own money down, especially in a market of rising interest rates (the Fed can’t print money forever.)
I waited and wondered if you would let ” as you know ” go by . I agree that Democrats eliminating Fannie and Freddie is surprising considering how useful they were to the jackass party. What ever they replace them with, I doubt they keep out the patronage that ruined things in the first place .
I waited and wondered if you would let ” as you know ” go by .
People like Scott continue to deny that the government has massive influence on the housing market.
I would LOVE to take one of his classes!