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Froma Harrop
Froma Harrop
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Fannie and Freddie Must Go

Comment

Say we didn't hear that. Say we didn't hear that rules for mortgages guaranteed by the taxpayers are going lax once again.

Oh, but we did. For starters, the push is on to lower the minimum down payment required for Fannie Mae and Freddie Mac mortgages to only 3 percent.

During the housing bubble, Fannie and Freddie bought a lot of substandard mortgages. That's why, when house prices cratered, so did they. The government had to bail them out to the tune of $188 billion. It makes little difference that the taxpayers were eventually paid back. Assuming the risk was not their job.

Taxpayers, you are being handed the bag once again. What makes you particularly vulnerable are the potent political forces determined to keep the game going — an odd alliance of Wall Street financiers and advocates for low-income Americans.

Fannie and Freddie are "government-sponsored enterprises." They buy mortgages from lenders and package them into securities, which they then sell to investors. As long as these securities carry the government guarantee, investors need not lose sleep over the quality of the mortgages. Taxpayers should.

There have been attempts since the financial meltdown to dismantle Fannie and Freddie. But powerful banking interests have fought every move to transfer risks from the taxpayers' shoulders to their own.

In response to an angry public, they said, "Rather than end the guarantees, let's add safeguards to better protect taxpayers." Some new rules were made. Now they're being unmade.

The Federal Housing Finance Agency wants the minimum down payment required for a Fannie-backed mortgage, raised to 5 percent, lowered to 3 percent. The prudent rule is for at least 20 percent down.

So-called advocates joined the push for easier mortgage terms — and they should be ashamed, by the way.

"Easy money" has been no friend of the poor's.

Wall Street feasted during the real estate orgy, preying on the unsophisticated with abusive fees and exploding interest rates. Folks of modest means — drawn into its web by no- and low-down-payment loans — lost their homes.

But before going on, let's properly assign blame for the recent financial mess. It was not, as many on the right insist, programs forcing upstanding bankers to lend money to marginally qualified borrowers — read "minorities."

By the late '90s, half of subprime loans were made by mortgage companies not subject to the much-maligned Community Reinvestment Act. And in any case, the George W. Bush administration gutted the CRA regulations in 2004.

Low down payments often come with higher interest rates — and a requirement to also buy mortgage insurance. Far from being compelled to lend to poor people, Wall Street seeks them out as appealing targets. And when taxpayers assume the risk, it's a no-lose proposition, is it not?

As for this passing on of risk from lenders to taxpayers, you don't have to be a conservative to despise it. Barney Frank, the former Massachusetts rep who once headed the House Financial Services Committee, was appalled at the killing of another rule — one that made lenders assume at least 5 percent of the risk for less-than-supersafe mortgages that were rolled into securities.

Frank was extra-pained to see advocates for the poor helping the banking and real estate interests pull this off.

In most of the Free World, governments do not guarantee mortgages. Nonetheless, their people own homes. In this country, bankers and allied interests extract both lax rules and taxpayer guarantees.

And to think, Fannie and Freddie aren't even out of conservatorship yet.

It's time this story moved from the business pages to the front pages. Fannie and Freddie must go.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators Web page at www.creators.com.

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Comments

1 Comments | Post Comment
Ma'am;... The risk which could be mitgated, or averted in a sane economy of buying realestate could certainly be taken over by the people of this land. There is no reason our government or the fed, or anyone should be loaning money to bankers to loan to us when those loans and the interest they demand are bleeding us. Eliminate these middle men who we now see have to suffer no risk and no loss, and enjoy only gain at our expense.
We used to be a pay as you go society. Maybe not enough got done. Maybe interest was a great way to build capital. When did it become necessary to borrow for every living thing we do in America, private or public? Clearly, some people can go to their own ethnic groups for favorable terms, but we have Legal Usary as well.
What do these bankers do for all they take. I met a man yesterday working for a low rent car dealership. His job was detailing cars, for the most part, repo's since they repo nearly three quarters of the cars sold, and they will sell to almost anyone, with a down payment and a month of payment ahead. Money runs out and the car comes back. And some times houses too come back in this society, and some times with a great loss of money and of equity.
My question to you is why the American people stand behind the loans made to themselves when they might loan themselves the money in the first place? Not only do we stand behind this usary of our own making, we give those who pay it on houses a break on their taxes. Does such a break encourage lower interest rates or higher, because it certainly cuts the government and the people out of revenue that must be covered in some other fashion. And then, to cover the shortfall, government borrows, and does it loan the very money it borrows from the rich, because if it does not, it certainly does not tax those who loan to it, so they have the money they should payin taxes- to loan.
People are everywhere concerned with government taking from them, and they do not get that the government should take from some people, and that only some people should support the government because they have ended up with the commonwealth. No one is worried about how much the rich take from everyone including the government, but almost everyone would agree that they feel taken from. So they build up this monster in their minds called THE GOVERNMENT. We might say that. It is not OUR Government. It is a foreign power owned by foreigners even if they be native born. We are like their cattle. The government is like their cowboy riding herd on us, and together they bleed us. But just because it is THE Government today taking part in skinning us alive, does not mean it will always be so.
If we took over every elected office we could not change the Constitution, and if we cannot change that, we can change nothing. Without the willingness, and without the courage to sweep all of government/economy away no change by itself will be effective. What we have, and what we did not begin this society with, is wealth without responsibility. That- was natural for the Romans, and we built this government and society after the model of the Roman Republic. Still, Property got the protection of government in part because the commonwealth in private hands was supposed to support the government. When the people realized that so much of the wealth was not in property, and that small landowners were carrying the rich who were only money rich, they tried to tax income, and at first the rich howled, and then they simply applied the tax to poorer and poorer people which made workers work harder, and made a bank of realestate so that it could be held year after year for speculation.
No longer did taxes force property to be productive or put it on the auction block. Now it can be held at slight cost, and can only be ransomed by a new owner by a great expense in interest. How was it possible for real estate to be bought and sold so far above its true value as the crash revealed? Taxes that actually supported the government would have kept unused land on the market, and kept its price within the reach of average people. Raising its value artificially only increased the need for loans and interest, much of which the government, meaning this people- stand behind.
We are loaning to ourselves through middlemen who bleed the life of this society and this people, so that we might own some part of the commonwealth we already hold the title to. No part of it makes sense. It is a shell game we cannot avoid playing. To have the rights of property we must pay the interest and inflated cost of money. At the same time, to pay the interest our employers have to accept- as a part of their survival means we must work harder for less. Across the board, virtually nothing good gets done in society without the curse of interest payments put on it. No hospital is built or school without a profit, but the largest share of that profit goes to people who never lift a wrench, and behind this outrageous situation stands the government as much in hock as anyone else, but handing over our money and guarantees for the privilage of borrowing the very money they have loaned to the banks. It is a house of cards. If the people grow sick of it, it will come down. All of the money, and all of the wealth squeezed out of this country and this people can be returned to us. I am not saying it will be easy; but it is necessary; and if we do not want these parasites to kill us, we have to remove them from their food, which is our lives.
Most people in this country will never escape the paying of interest on personal loans in the course of their lives. If they could do so they would pay interest with everything they buy, and in the taxes they pay. We are being killed by this constant drain of our lives and vitality, and it limits the ability of everyone, and the scope of every good that government was created to achieve. it is no blessing, but it is an absolute curse.
Thanks... Sweeney
Comment: #1
Posted by: James A, Sweeney
Wed Oct 29, 2014 10:18 PM
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