Frank Calls For the End of Fannie and Freddie
Last week the Wall Street Journal reported that Rep. Barney Frank [D-MA], the chariman of the House Financial Services Committee, called for the elimination of Fannie Mae and Freddie Mac. To quote Rep. Frank
“The remedy here is…as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance.”
No details were given about what would replace them, but given Frank’s political DNA, I’d bet much more towards direct government control than a smaller privatized company.
Currently, Fannie and Freddie combined own or guarantee about half of the $11 Trillion in outstanding home mortgages. By controlling such a large percentage of mortgage assets, they essentially control the mortgage industry. The market [or more accurately, the lack of a market] for jumbo loans is a prime example of this. Having that completely replaced with a government agency would, essentially, nationalize the mortgage industry.
This might be good in the short term, as it would make the mortgage markets more predictable and stable. In the long run, however, government control is a mistake — it would give the government almost total control over what gets built, who can buy it, and where citizens can live. Putting something this integral to the lives of Americans in the hands of politicians only invites a repeat of the tragedy that got us here in the first place.
Tags: mortgage news
