President to Insist on System which Provides 30 Year Fixed Rate Loans
That was the headline
essence in Tuesday’s Washington Post story --by Zach Goldfarb—regarding President
Obama’s “housing speech, delivered later that day in Phoenix in which he joined the get rid of Fannie and Freddie chorus.
must be giggling if not laughing out loud when the US Justice Department indicts Bank of America for mortgage fraud on the same day the US President calls for more bank investment in mortgages.
Did anyone remind the Mr.
Obama that—because of Fannie Mae and Freddie Mac--we have that vuirually every American family has that mortgage
available now and that the only thing which threatens their access to them is legislative
manipulation of the current mortgage finance system to permit the large
commercial banks to dominate it, with their preference for offering short term
adjustable rate loans or FRM with exorbitant margins?
On what planet has our President been living?
Policy makers are twisting
and contorting, telling lies about the GSEs and going through “all sorts of
changes,” just to support a Senate bill which still has lots of gaps and which
nobody can prove will perform better than what we have today.
I’ll ask again, “Why the
need to destroy Fannie and Freddie,” which performed well before the
subprime debacle and so superbly being since
they were re-regulated in 2008. For the past several years, the two have held
up the nation’s conventional residential mortgage market through some very bad
Smart policy is not blowing
up the mortgage market structure and bringing in new machinery when the existing machinery works
well and--with minor enhancements--can be made to work better, insuring the one
product which most Americans—sorry AEI/Cato et al—truly want, the
long term fixed rate mortgage.
Mr. President, it’s the big banks which—given
options--don’t want to make FRM and Corker-Warner, as well as the dinosaur
Hensarling bill are inviting the banks to take over more of the mortgage
Congress is an “ass” when it
comes to legislating and its all or nothing approach—in this mortgage market
matter--adds to all of the other questions about their collective rationality/judgments.
Keep it simple: Let F &F
repay the Treasury, which on paper could occur in the next six months, and free
them—to work in and among other mortgage lenders and investors--in whatever way
the mortgage market demands.
Maintain F&F's higher capital and their current regulatory structure--which keeps both companies away from
financing anything but quality loans--and don’t carpet bomb the mortgage
terrain, with zero understanding of what will emerge with F&F's destruction.
Isn’t that what the US did,
literally, in Iraq and Afghanistan with very unhappy results, because our government didn't
comprehend soon enough the consequences of its actions?
Congress, look carefully at
what you have and how it can work for you before you pitch it.
(With the two expected top announce earnings in the next few days, be sure to watch how
Treasury—no matter who proposes what —will hang onto the Fannie and
Freddie business revenues long after the amount the two “borrowed” is repaid.)