Wednesday, January 25, 2012

"government sponsored enemies" ????

“These government-sponsored enemies in the case of Freddie Mac and Fannie Mae are a large reason our housing crisis has occurred,” said Romney, who stood on a podium in front of a home that once belonged to Chris and Bridgette Davis, who saw their home foreclosed on in June 2011, according to public records.
“I am running against a guy in this primary, who was out working for one of these guys, Freddie Mac,” said Romney, who then launched into a renewed attack on Gingrich being an “influence peddler.”

Romney needs to learn some history of the housing marketplace before he tosses out cheap political crap like that.  Freddie Mac and Fannie Mae, following in the footsteps of the FHA and VA programs with Ginnie Mae, served for decades in expanding responsible homeownership and eliminating the term disintermediation from the vocabulary of mortgage bankers.
By creating a marketplace with uniform documents and standards, these entities created a marketplace through which whole mortgage loans and later securitized pools of mortgages could move, thus making money available nationwide without interruption.
I am still stymied over the full scale Koolaid drinking abandonment of good lending standards first embraced by private mortgage banking then embraced by Freddie Mac and Fannie Mae but the abandonment of standards did not start with these entities.
It started - in my opinion - with ridiculous underwriting standards - now know as sub-prime lending - adopted by lenders moving paper privately.  A boom market which covered up the consequences of bad lending lead management in the mortgage banking business and related businesses - the security houses, for instance, to operate in a whole knew lending mindset, one focused on churning volume and not quality.  Fannie Mae and Freddie Mac should have stopped it but management there was subject to the same influence and caved.
While purists want government out of the mortgage market, let's step back and review how the market worked before these agencies were born and rather than bill them as enemies, let's have an intelligent discussion about disintermediation and whether the American public might not need a statesman who has an understanding of broad issues who might help them understand why such agencies were created and why we may need reform but not a hanging post. 
This is why I am very interested to know more about the nature of the consultation provided by Newt Gingrich.   I can see why a historical perspective is necessary when trying to help an agency like Freddie Mac fix what is wrong.


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