MPA Comment of the Week: A warning from history

by MPA16 Aug 2013

Once again, we celebrate MPA's Comment of the Week.

Originators have been sounding off again this week, adding their perspective on the news shaping the industry. Of particular interest has been President Obama's plan to dismantle Fannie Mae and Freddie Mac and replace them with a new government reinsurer. The president's fellow Democrat, Harry Reid, has broken with the administration on the plan. Jim Malloy took to the MPA forums to offer a history lesson in the dangerous consequences of winding back vital government infrastructure.

"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 led 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 their 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."

Well said, Jim Malloy. Your post is MPA's Comment of the Week.


  • by Joel Epstein | 8/16/2013 9:07:50 AM

    I agree. The GSE's are making big profits and paying back the gov't mortgages. Remove the conservatorship, give them strict guide lines and have Congress stop messing with them.
    They have served the industry well and will do so in the future.

  • by Amazed reader | 8/16/2013 9:30:21 AM

    To suggest that Andrew Jackson's actions in the 1830's led to the Great Depression of almost a century later is like blaming the guy who invented the wheel for all automobile fatalities. MPA,maybe you don't need to have a "comment of the week" every week, or at least not this week.

  • by CharlieG | 8/16/2013 9:30:37 AM

    Congress has shown that it will never stop "messing" with government programs. We had the Federal Reserve in place but still had the Great Depression. Get the government out of lending and let the free market assess the risks and set the criteria. too bad for those who can't qualify and too bad for those who now use the broke FHA as a subprime outlet. Fannie was created in 1937 because no one would buy FHA mortgages. Their mandate was extended in 1969 to include conventional mortgages but they didn't start buying them till 1971. Both types of mortgages are now widely accepted as investment grade (provided they are underwritten properly) so let's get the politicians out of control of those organizations.
    A brief history:
    FHA's 235(i) mortgages caused the FHA's general fund to go into the red for the first time; hence the creation of UFMIP and they still ain't making the grade.
    FNMA's mortgage levels and subsequent dip into toxic waste caused its demise. Go away government. Go away politicians and leave us the hell alone!


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