Reid implores Obama not to kill Fannie and Freddie

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Senate Majority Leader Harry Reid (D-Nev.) has broken with the president on the plan to dismantle mortgage giants Fannie Mae and Freddie Mac.

President Obama supports a Senate bill introduced by Bob Corker (R-Tenn.) and Mark Warner (D-Va.) that would replace Fannie Mae and Freddie Mac with a new government insurer as part of a new mortgage system in which private capital would be required to take at least 10 percent of first losses on mortgage securities before the government stepped in.

“The president just a few days ago said we’re going to have to take a look at Fannie and Freddie,” Reid said in a recent interview with Nevada Public Radio. “These are the government organizations that have made homeownership so easy. I don’t agree with the president. He says he wants to get rid of them. I think we better (be) very, very careful doing that. And I’m going to look closely at his recommendations because on their face, I don’t like them.”

House Republicans, meanwhile, want to dismantle Fannie and Freddie without providing any replacement. A bill that would essentially privatize home finance entirely, the Protecting American Taxpayers and Homeowners (PATH) Act, passed the Financial Services Committee in July without Democratic support.

“It doesn't matter if it's Fannie Mae and Freddie Mac or a new entity that serves a similar function -- if the government is providing that backing it will crowd out the private sector and again put taxpayers on the hook for Washington's failed policies,” Republicans stated in an Aug. 7 blog on the committee’s website. “That is not reform -- it's the status quo with new packaging.”

Meanwhile, some experts are predicting that if Fannie and Freddie get the axe, homeowners will pay more, regardless of which plan wins the day.Mark Zandi, chief economist for Moody’s Analytics, told USA Today Aug. 7that as private investors shoulder more of the risk, they’ll likely spread at least a little of the pain to consumers.

“It will mean higher mortgage rates,” Zandi said. “The question is how much higher.”

  • Bayview Mortgage Inc on 8/14/2013 9:38:24 AM

    Just cut out any loans higher than $ 315,000.
    Thus the banks will have to take responsibility for any loan above this amount. Fannie and Freddie , FHA and VA were only suppose to bring borrowers into the system. Not support them.

  • Andrea on 8/14/2013 9:48:52 AM

    It is really too bad how out of touch the current Administration is with reality and real people and their refinance and purchase needs.

  • Ken on 8/14/2013 9:51:09 AM

    Be careful - the Law of Unintended Consequences can be brutal.

  • Jim Malloy on 8/14/2013 9:59:53 AM

    Fannie and Freddie are infrastructure, which is an important government role. The problem was the politicians meddling in the guidelines making them crazy.

    Like building the interstate freeways system, we get much more done in a shorter period of time. Do you want you package shipped ground from Miami to LA to take a month? No, the feds built freeways and now private industry ships it over ground in 5 days.

    Fannie and Freddie were like a central bank. It is infrastructure. When Prez Andrew Jackson destroyed the 2nd Bank of the US (the central bank at that time) it led to local banks getting out of control which lead to a greater depression than in the 1930s.

    The answer is to give FNMA and Freddie more conservative guidelines so the politicians can not meddle for political purposes. The law should say they must be let to do they business but with annual and open to the public audits.

    Also the investors in them would get their money back when their value comes back.

  • Phil Corvinus on 8/14/2013 3:14:30 PM

    Wells Fargo was pushing to kill both orgs. in the 70s, thank goodness thy failed. While it would be a good thing if both were combined for a more efficient company and keep rates at a reasonable market rate. If Wells Fargo and their allies succeed this time funds will dry up and rates will go through the roof

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