Top Story: Everyone wants to reform mortgage financing — and that’s where the general agreement ends.
- President Obama spoke today of a new Big Agenda Item he wants to push: Fixing Fannie Mae and Freddie Mac. (CNBC)
- The goal is to keep today’s housing rebound on the up, up, UP! – while at the same time erasing the bad practices that caused housing sales and prices to go boom! (Reuters)
- Obama’s proposals largely mimic the efforts of Sens. Mark Warner, D-Virginia, and Bob Corker, R-Tennessee. Their bipartisan bill has three main functions: a) wind down Fannie Mae and Freddie Mac b) transfer of their duties to a new agency and c) requirement private entities eat the first 10% of any losses. (Sen. Mark Warner)
- “Bipartisan” bill often means “bipartisan” critics, though. And in this case, even advocates of the bill note that “bringing in private investors who take losses ahead of taxpayers will translate into higher mortgage interest rates”. That’s not going to make builders or prospective home-owners happy. (Economix)
- Some conservatives fret that that what dogged Fannie and Freddie would dog the new Federal Mortgage Insurance Corporation, namely: “Interest groups and Congress will press the FMIC to lower its underwriting standards so that more and more loans can be insured.” (American Enterprise Institute)
- Ditto, too, progressives, some of whom see that 10% rule as underpriced and thus a giveaway to private creditors. (Naked Capitalism)
- And then there’s the politics of doing something really, really big: “It is impossible to reform Fannie and Freddie when the economy is down, because Washington fears turbulence in the housing market, but it is also impossible to reform them when the economy is good, because they throw off money.” (National Review)
John Flowers