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  • A New Fannie Mae and Freddie Mac? Even Former Obama Advisers Say No!

    The Washington Post reports that President Obama wants the federal government to continue to have a major role in housing finance, perhaps by creating a new version of Fannie Mae and Freddie Mac. Despite an almost immediate denial of the story by Deputy Treasury Secretary Neal Wollin, the Post’s account is so detailed that it is likely to be true.

    The story is given extra credence by the fact that it tracks with the Obama Administration’s February comments about the future of housing finance: “As Fannie Mae and Freddie Mac are wound down, we must design a transition that allows for continued [government] support of the housing market, so that Americans continue to have the ability to take out a mortgage to buy a home or refinance their existing mortgage” (page 27).

    Any new or revised form of Fannie Mae or Freddie Mac would be a huge mistake that would end up costing taxpayers yet more billions of dollars to bail out eventually. Already, taxpayers are on the hook for more than $150 billion that has gone to the existing housing finance giants because of losses they suffered when the housing bubble burst in 2007.

    Both Fannie Mae and Freddie Mac must be permanently and completely closed as quickly as the process can be responsibly completed. And under no circumstances should they be replaced with a program that would inevitably grow into a new Fannie Mae.

    This is not a radical notion. According to the Post story, both Obama’s former Council of Economic Advisors Chairman Austan Goolsby and former National Economic Council Chairman Lawrence Summers—neither exactly a conservative—favored ending Fannie Mae and Freddie Mac and not replacing them. The story says that Goolsby “argued that the federal role in housing distorts the free market. By subsidizing mortgage investments, he argued, the government drives capital away from other types of investments—for example, those in companies developing environmentally friendly technology. He also warned that the government is putting enormous sums of taxpayer money on the line while conveying little actual benefit to home buyers.”

    Assuming that the story’s account is accurate, Goolsby is exactly right. The private sector is more than capable of creating mortgage-backed securities and pricing an appropriate guarantee. In the future, the housing finance system should not contain anything similar to Fannie Mae, Freddie Mac, or any clone of either. That should be the guiding principle of housing finance reform.

    Posted in Featured [slideshow_deploy]

    13 Responses to A New Fannie Mae and Freddie Mac? Even Former Obama Advisers Say No!

    1. Harry Schell says:

      Sure they say no…now. Obama is dedicated to one thing, expanding the control of federal agencies as far as he can take it, through legislation or regulation. Only in this way can Democrats expand constituencies which depend on government for some largesse, and the polticians who supply it. CA is an example of where Obama wants to go ,with a near permanent Democrat majority supported by racial and union interest groups that steamroll opposition, or think they can. This is not about what is good for the country or its people, but an elite Obama thinks he is leading.

    2. Bobbie says:

      there is no reason to replace the government run fannie and freddie. If people can't afford a house they can learn it is NOT their RIGHT to have!! Hearing housing unions advertise for workers saying one house employs two people? That's fine and dandy if there are people looking for houses that can afford them. It doesn't make sense to advertise jobs that can't be paid for! We need private market in housing and personal accountability held where rules apply equally. Government interference is holding us back.

      growing up it seemed NEW houses were ONLY built when people had the money to buy! NOT FOR THE SAKE OF government's "job creation." dumping any and all consequences on the tax payers. That of course was when it was in the hands of the responsible and intelligent, more efficient and effective, private sector! Where conflicts of interests doesn't appear.

      • land of the living says:

        The word of GOD said ,if we would humble our selves, and turn away from our wicked ways. Then , will we hear from Him and heal the land.

    3. John B says:

      What I find funny is, it was actually the private sub-prime market that caused the housing bubble, and caused the bubble to burst bringing down Fannie and Freddie with it. Now, we want to shut down Fannie and Freddie–which opperated successfully for decades–and then let the same people who actually caused the crisis to put a new solution in place.

      The idea of Fannie/Freddie was to create a private company that operates under extremely strict controls. If we allow the private sector to take over this responsibility, it will need to be similarly regulated or the next panic will be even bigger.

      • John Doe says:

        I agree with John B. Fannie worked for years until they were told to make it OK for people to lie on their mortgage applications. Fannie made it too easy to qualify, and now they make it too hard to qualify for a mortgage. Over kill every time. We have a huge inventory of empty houses that need to moved to get our economy on the move again.

    4. Mike, Wichita Falls says:

      Were we not told that Dodd-Frank would put an end to bailing out companies that are "too big to fail"? Repeal it too.

    5. Lloyd Scallan says:

      If you really want to know why Obama and the Dems want to keep Fannie and Freddie operating, read
      the book "Reckless Endangerment". You will learn how many million of dollars were paid to powerful
      congressmen, many of whom still remain in Congress, to not only protect the two corporations, but the waste of the billions of our tax dollars to bail them out.

    6. RedBaker says:

      Government involvement in the mortgage market is a huge vote-buying operation. Conventional politicians will never give it up, they must be forced. Government backing of financial transactions of every type must be vilified and attacked.

    7. Bobbie says:

      John B's on kool-aid!!

      • John B says:

        So you want to give the same people who caused the market collapse the power to do even worse but unchecked? Sounds like your drinking more than kool-aid.

        • Bobbie says:

          not me! I want people who can afford a house to be able to buy a house. I don't want the government setting up the market place with all kinds of loan amounts given to irresponsible people with no credit or no expectations with excuses to back not to pay for it. My goodness, we had to sign our life away. we didn't know anything about buying a house. we're still in our first home!! A signed contract is a signed contract, John. It isn't the role of government to interfere on behalf of the signature at fault or create regulations in favor of the signature at fault! Not with public tax funding!!! And it CERTAINLY isn't ethical of government to impose regulations that impose more government! You're American, right? You should know that! People have to be responsible, John. So no, I don't want the same irresponsible acts adding to the cause of the market to collapse again! People learn by following the rules and being held accountable to them. I also don't want government causing job losses!!

    8. joe says:

      Why refinance and pay fees which will add to your loan balance when you can get a loan modification for free? With a loan modification there are no closing costs, you can lower your rate to 2%, you don't need any equity in your home, you could get a possible principal reduction, your credit score has nothing to do with qualifying for a loan modification, bankruptcy does not matter, foreclosure doesn't matter, and you can apply yourself and structure the loan modification to give you the lowest possible payment.

      Learn how to apply for a loan modification and structure it to give you the best deal: There is a book called "Loan Modification Secrets" that you can get if you go to Google eBooks or it is also at Amazon which will show you how you can apply and structure your loan modification. good luck!

      http://books.google.com/ebooks?id=sM_ogZNFxM0C&am

    9. Derak says:

      The new time-bomb 0bama wants to set is a different set of loan requirements for 'protected classes.' So, your finances don't make it over the bar to qualify for the loan? Oh, you're (insert minority)? The bar has been lowered, and now you are approved. Since your expenses are already near equal or exceeding your income now, then at the next increase in food price or decrease in hours, if you actually have a job, then you can stop making payments, or pay interest only, if that isn't already the case. Surely the banks will just eat it and not pass along the cost of your missing payments onto other customers or repackage your loan and trade it, or get other banks to insure it, ending in a bubble and eventual collapse in the financial markets as any increase in interest rate results in millions of defaults around the country. Surely?

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