Right Thinking From The Left Coast
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Friday, August 20, 2010

Hearing the Message on Fannie

Ever since financial reform moved into public view, conservative critics have been screaming, “What about Fannie and Freddie!” Looks like our voicing are being heard, if not yet responded to:

Top Obama administration officials opened a conference on the future of housing by making clear Tuesday they are considering a limited range of options that would reduce but not eliminate the government’s role as a provider of funding for home loans.

Treasury Secretary Timothy F. Geithner, while promising “fundamental reform,” said the government must continue to play a role in insuring new home loans. “There is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing a measure of stability in access to mortgages, even in future economic downturns,” he said.

Housing and Urban Development Secretary Shaun Donovan said the current housing finance system—under which the government-backed mortgage finance companies Fannie Mae and Freddie Mac and the Federal Housing Administration stand behind nine out of 10 new home loans—cannot continue. “The government’s footprint in the housing market needs to be smaller than it is today,” he said.

Just to be clear, they’re not talking about getting the government out of the housing market, which would be the sensible thing to do.  They’re shifting things away from Fannie and Freddie, but not completely eliminating them.  They want to move them into less risky situations, such as essentially providing insurance to big mortgage companies in return for a fee.  Even Barney Frank has gotten into the act, calling for Fannie and Freddie to be abolished and replaced with straight-up housing subsidies.

That’s ... an improvement, I guess.  But it’s not quite where we should be headed.

All of this becomes academic come November, when the Republicans will most likely take over Congress.  But if the Democrats are willing to concede a little bit on this, there’s hope we can wind down, at least partially, the massive mistake that was Fannie/Freddie.

Posted by Hal_10000 on 08/20/10 at 03:48 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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