Fannie & Freddie Un-regulated?
Special Report with Brett BayerFox News
May 11, 2010
Some republicans raise a pointed question…why does a financial regulation bill ignore Fannie Mae and Freddie Mac, which were at the center of the housing crisis that led to the financial meltdown?
They’ve already soaked up 130 Billion dollars in bailout money from taxpayers and both will need more!
According to Judd Gregg of the Senate Banking committee, ( “It is estimated that the American taxpayer will end up picking up somewhere around 400 -500 Billion dollars in costs, as a result of the activities of Freddie and Fannie.”)
They played a key role in the housing market by buying mortgages from other lenders making more money available for new loans. But during the Clinton administration they were handed a new mission to expand home ownership to those who had been unable to but, which meant making loans to people with bad credit.
According to Peter Wallison of the American Enterprise Institute, (“Fannie and Freddie started making loans that had no down payments, and those loans are extremely weak.”)
Senator of Maine, Susan Collins stated, (“They also bought risky mortgage loans made by other lenders which allowed banks to offer more and more of them. That allowed Freddie and Fannie to amass these huge portfolios and mortgage backed securities that were made up of subprime mortgages…eventually that’s a house of cards, and it collapsed.”)
Republicans are demanding changes in their practices and would give them 2 years to clean up their finances and get off government subsidies or be liquidated.
However, the Senate voted down McCain’s proposal, but approved the Dodd Amendment ordering the treasury to study the issue and report back next January.
One other point:
There had been a cap on taxpayer liabilities of 400 Billion dollars, but last Christmas eve the treasury quietly lifted the limits, meaning taxpayer exposure to Fannie and Freddie is now unlimited.
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“If they are deliberately paying too much for mortgages to support the banks,” Mr. Baker said, “the government wants them to be in a position to keep doing that, and that would mean not doing anything about their status until further down the road.”
It’s no surprise that the government doesn’t want to acknowledge the soaring taxpayer costs associated with these mortgage zombies. The truth about Fannie and Freddie has always been hard to come by in Washington, and huge piles of money seem to circulate silently around both firms.
REMEMBER last Christmas Eve? That’s when the Treasury quietly decided to remove the $400 billion limit on federal borrowings available to Fannie and Freddie through 2012.
That stealth move didn’t engender much confidence in either the companies or their government guardian.
But because taxpayers own Freddie and Fannie, we should know more about their buying habits, as Mr. Baker points out. Unfortunately, if the government’s past actions are any indication of what we can expect, then don’t hold your breath waiting for the facts.