Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
Read John Carney's op-ed in the New York Times:
by waiting for a recovery before reforming the government’s mortgage-backing trio, we are getting things backward. Far from being the last bulwark supporting the housing market, the F.H.A., Fannie and Freddie are very likely holding back the private loan industry. And, unfortunately, a little-noticed provision of the Dodd-Frank act threatens to undermine efforts at rebuilding an innovative and healthy private sector for mortgages. [...] lenders will find that it costs far more, and involves more risk, to offer mortgages they back themselves than those covered with a guarantee from the agency.
"Purely private mortgages will quickly be pushed out of the market," Carney writes. "Unbelievably, the two entities whose mortgage market follies led to their collapses may well be given a pass when it comes to managing risk."
Reason's Matt Welch has much more on the nightmare on main street we can't wake up from.
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Jun '10
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
If the federal government ever got into the catering business, people would be dropping and dying from food poisoning all around us...and "Bush's fault" no doubt.
May '10
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
And then, after the inevitable congressional hearings, they would propose new, draconian regulations, a new Deviled Egg Czar, mandatory food poison insurance coverage for the guests, a new 5% tax on mini beef Wellingtons, and national oversight powers for the very same folks who sent out the tainted deli trays. Expect the cost of finger foods to triple.
Because that's how our government rolls.
Jun '10
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
The John Carney piece is informative. It's interesting the European Union had "outlawed governments from backing mortgage companies — avoiding entirely the implicit guarantees that let Fannie and Freddie grow without credit market discipline."
Plus I always appreciate it when someone interprets some of the details of these massive reform bills. In this case, Carney does a good job of laying out the ill effects of the 5% rule exemption for mortgages guaranteed by the F.H.A. under the Dodd-Frank Act...
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
It's strange, James, because in yesterday's NYTimes, William Poole had an op-ed heaping equal scorn on Freddie and Fannie. A snippet:
Shut 'em down. Do it sensibly. But make them go away. I think taxpayers and the financial system as a whole would breathe a sigh of relief.
Jun '10
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
...However, I'm skeptical about his statement: "Just about everyone agrees that the government’s extraordinary role in supporting the housing finance market should be curtailed." Just about everyone agrees? Really? Whenever I discuss the housing bubble with liberal or even moderately conservative friends, I watch their eyes glaze over whenever I point out the part Freddie and Fannie played. Why get into the details of government backed institutions, when it's much easier and much more exciting to fault predatory lenders, CEO salaries, and greedy bankers and their greedy capitalist greed?
May '10
Re: Nightmare on Main Street: Freddie Won't Die (Fannie Neither)
I know I would.