The government-backed home mortgage behemoths Fannie Mae and Freddie Mac are being targeted for the executioner’s block, kind of:
… the Obama administration outlined plans to unwind the government-sponsored mortgage agencies Fannie Mae and Freddie Mac, essentially asking Congress to hand over responsibility for the nation’s home mortgages to the very industry whose reckless support of the corrupt lending practices that provoked the current crisis.
Sounds like a terrible idea, yes? But the administration has some big plans for taming the feral financial services industry, and the Dodd-Frank financial reform bill was just the beginning.
From the limited amount of reaction on the left, at least that I’ve noted, I get the impression that people aren’t sure what to think of this. It’s certainly not a priority item for activism, at the moment.
More info here:
Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.
The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.
The first option outlined in the report calls for a private system in which lenders and investors fund new mortgages, with a limited role for existing federal agencies to subsidize home loans for the poor and other special groups, like veterans. The second proposal calls for much of the same, but it includes a government backstop for mortgages during times of market stress. If credit markets froze — like they did at the height of the crisis — the government would step in and guarantee new home loans. The third option outlines a much broader government role. Under this alternative, taxpayers would insure securities backed by home loans, which is what Fannie and Freddie already do.
Many conservatives would undoubtedly like to dump and deregulate overnight, letting the hordes of rapacious home-loan parasites run amok like a plague of tapeworms. Either they don’t ever learn, or they honestly believe that another massive housing bubble/bust would be a good thing. Anyway, that ain’t happening.
Longer-term, I agree that deemphasizing housing as the “driver of America’s economy” is a good idea. With a leveling population count and pressure on resource inputs (it’s not just houses we’re talking about, but the infrastructure, like highways, as well), it doesn’t make sense to believe that new home construction will, or should, proceed apace, indefinitely. But it’s going to be an extreme challenge, to replace an emphasis on “growth” for growth’s, and greed’s, sake, with one on what might be termed “dynamic equilibrium,” in housing and everything else.