Obama wants to trash government's role in housing

Mike Whitney, Counterpunch - The Obama administration is working on a plan to liquidate Fannie Mae and Freddie Mac so that future profits from housing sales and secondary market activity flow exclusively to privately-owned banks and financial institutions. President Obama made the announcement last week in a speech in Phoenix saying that he wanted to “wind down” the two Depression-era government sponsored enterprises and put “private capital” at the center of his housing finance reform strategy. He reassured investors and bondholders that the government would still underwrite the pools of loans that are bundled into bonds and sold to investors as mortgage-backed securities despite the fact that US taxpayers will receive zero compensation for the explicit guarantee. Obama has abandoned the pretense that economic policies have a public purpose. What matters is profits, Wall Street’s profits...


Fannie and Freddie only got into the subprime business at the very end to shore up market share, but –as Forbes notes, “The vast majority of subprime mortgages — the loans at the heart of the global crisis — were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie.” It was private capital that eased lending standards and produced the ALT As, the piggybacks, the liar’s loans, the ARMs and the other financial abominations that blew up the repo market, collapsed the shadow banking system, and sent global stock markets tumbling. This is the same private capital that Obama wants to use to replace the two GSEs who saved the home finance market from complete collapse following the Lehman default in 2008.