Is Obama Planning to Keep Fannie and Freddie Alive?

By:  Michael Tennant
08/17/2011
       
Is Obama Planning to Keep Fannie and Freddie Alive?

Is President Barack Obama working on a proposal to keep Uncle Sam deeply involved in the mortgage business and taxpayers on the hook for billions of dollars in home loans? The White House says no, the President is merely examining his options. Meanwhile, the Washington Post, based on leaks from anonymous officials, reports that he is indeed looking to maintain the federal government’s outsized role in guaranteeing mortgages.

Most sound observers of the mortgage crisis say that to maintain the status quo would be incredibly foolish. They have concluded that federal guarantees of subprime mortgages via “government-sponsored enterprises” Fannie Mae and Freddie Mac, along with other federal policies encouraging banks to issue loans to less-than-creditworthy borrowers, were one of the major causes — if not the major cause — of the mortgage meltdown. Fannie and Freddie, since taken over fully by the government, have thus far cost taxpayers over $150 billion in bailouts, an amount that is expected to reach $259 billion by the time all is said and done. Who in his right mind, analysts ask, would want to continue down such a disastrous path?

Is President Barack Obama working on a proposal to keep Uncle Sam deeply involved in the mortgage business and taxpayers on the hook for billions of dollars in home loans? The White House says no, the President is merely examining his options. Meanwhile, the Washington Post, based on leaks from anonymous officials, reports that he is indeed looking to maintain the federal government’s outsized role in guaranteeing mortgages.

Most sound observers of the mortgage crisis say that to maintain the status quo would be incredibly foolish. They have concluded that federal guarantees of subprime mortgages via “government-sponsored enterprises” Fannie Mae and Freddie Mac, along with other federal policies encouraging banks to issue loans to less-than-creditworthy borrowers, were one of the major causes — if not the major cause — of the mortgage meltdown. Fannie and Freddie, since taken over fully by the government, have thus far cost taxpayers over $150 billion in bailouts, an amount that is expected to reach $259 billion by the time all is said and done. Who in his right mind, analysts ask, would want to continue down such a disastrous path?

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Photo: AP Images

 

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