Tim Geithner, Secretary of the Treasury, recently said the mortgage industry has to drastically change at a recent press conference. It wasn’t a regulatory or legal order, but rather a statement of purpose. Nevertheless, it is envisioned that he could be telling Freddie Mac and Fannie Mae to get their houses in order within the next year. Geithner also reminded the audience the taxpayers can’t afford to pick up the check for the kind of reckless practices they have had to pay for again.
There’s no real plan yet
Freddie Mac and Fannie Mae haven’t been told to do anything yet. Geithner was basically announcing a mission statement, and there were some things he made clear. The activities of Freddie and Fannie before the housing bust would not be reoccurring. The two mortgage houses would also not be put in position to try and dominate the mortgage market. He stressed, according to Reuters, that the mortgage industry was not sustainable as it at the moment stands.
No strategy yet
Industry authorities and economists have not come to any universal conclusions on how best to reform the industry. Geithner did support retaining some of the government backing of mortgages, as the richest industrial nations all have something akin to Freddie and Fannie for insuring mortgages against loss. Others, such as co-founder of Pacific Investment Management, Co. Bill Gross, contend that entirely nationalizing the housing industry is needed at this point. According to Businessweek, the investment guru contended the private market can’t make a comeback at this point.
Regardless of how, something must be done
How to proceed with Freddie and Fannie is subject to wild speculation, but few think nothing should be done. The government has already, as outlined by NPR, spent $ 150 billion on the mortgage houses. For the first half of this year, 89 percent of all new American mortgages were securitized by Fannie Mae, Freddie Mac, or Ginnie Mae . Ginnie Mae, unlike Freddie and Fannie, is wholly part of the U.S. government, sells mortgage backed securities only if they meet specific standards and doesn’t lend mortgages.
Reuters
reuters.com/article/idUSTRE67G3E820100817
Business Week
businessweek.com/news/2010-08-17/gross-urges-full-nationalization-of-housing-finance.html
NPR
npr.org/blogs/money/2010/08/17/129250765/socialized-housing-for-everyone
