At a recent press conference, Treasury Secretary Timothy Geithner called for changes to be made to the way the mortgage market does business. It wasn’t a regulatory or legal order, but rather a statement of purpose. Nevertheless, it is predicted that he will be telling Freddie Mac and Fannie Mae to get their houses in order within the next year. Geithner also made it clear the United States of America cannot afford to have to bail them out again and that they were too aggressive in taking on risk.
Geithner unclear on how to proceed
As of now, there is no real plan in place for how to proceed about Freddie Mac and Fannie Mae. Geithner did, nevertheless, make it patently clear there were some things that would be happening. First, Fannie and Freddie will not be resuming business within the manner they were conducting it before the market meltdown. The two mortgage houses would also not be put in position to try and dominate the mortgage market. He stressed, as outlined by Reuters, that the mortgage industry was not sustainable as it currently stands.
Little consensus on how to go about this
There is not much within the way of a consensus among industry insiders or economists on how to best reform the housing industry. All of the wealthier industrial nations practice some form of government securitizing mortgages, and as it has a legitimate role, Geithner is for retaining this function of Freddie and Fannie to some degree. Others such as Bill Gross, who was one of the founders of the Pacific Investment Management CO., are arguing the mortgage industry has to be totally nationalized. The investment impresario, as outlined by Businessweek, says the private market can’t mount much if any, of a comeback at all by this point.
Change has to be made in some form
The strategies of how to proceed may vary, but few disagree that something has to change with Freddie and Fannie. According to NPR, the government is already on the hook for $ 150 billion for the mortgage houses. For the first half of this year, 89 percent of all mortgages of course in America were backed by Freddie Mac, Fannie Mae and Ginnie Mae. Unlike Fannie and Freddie, Ginnie Mae securitizes only some mortgages, doesn’t lend to everyone, and is entirely part of the US government.
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
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