$154 billion. That is the amount of taxpayer money that will be needed to bail out Fannie Mae and Freddie Mac according to a new “stress test” performed by the Federal Housing Finance Agency. And that is the good news. If the economy dips into a second recession and foreclosures rise, the Fannie and Freddie bailout could nearly double in size. The agency, which oversees Fannie and Freddie, released the numbers “to inform public debate about the future of the two companies” ahead of expected Obama administration proposals slated for early next year. But if you are hoping for major policy changes from this administration, don’t hold your breath.
In August, Treasury Secretary Timothy Geithner hosted a meeting in the Treasury’s Cash Room with select bankers and administration cheerleaders like Keynesian economist Mark Zandi. This is how Daily Report for Executives summarized the meeting:
The government must continue to play a fundamental role in the future of housing finance, a panel of experts agreed at a conference convened by the Obama administration to begin to frame a comprehensive housing finance reform proposal for delivery to Congress by January 2011.
Just what is the record of government “experts” in preventing financial catastrophe? Well, the 3,814 employees of the Securities Exchange Commission, the 7,241 employees of the FDIC, the 3,216 employees of the Comptroller of the Currency, and the 3,204 employees of the Federal Housing Administration all failed to see, yet alone prevent, the recent financial collapse.
And just how “fundamental” a role is government playing in housing finance today? Well, in the first quarter of 2010, Fannie Mae and Freddie Mac, combined with the Federal Housing Administration and the Government National Mortgage Association, funded and/or guaranteed 96.5 percent of residential mortgages to homebuyers or homeowners refinancing for an existing home. And thanks to federal subsidies and bank mergers “encouraged” by the FDIC, a staggering 60.26 percent of all residential mortgages in the first quarter of 2010 originated through just four financial institutions: Wells Fargo, Bank of America, JPMorgan Chase and Ally Bank.
And these banks are not suffering from their government-granted monopoly. Wells Fargo, for example, reported $4.48 billion in mortgage banking income for the first six months of 2010. And the Securities Industry and Financial Markets Association (SIFMA) is bullish about its continuing partnership with the Obama White House. A recent SIFMA press release reads:
While we recognize that there is no single right answer to GSE reform, it is critical that, in addressing this complex task, the benefits to consumers and the economy which are created under the current system be preserved. We encourage policymakers to fix what’s broken without dismantling the aspects that have provided efficient, cost effective lending and benefits to our economy for the last 30 years.
What planet is SIFMA on? The homeownership rates in Australia, Canada, Ireland, Spain and the United Kingdom mirror those in the United States. And their citizens have accomplished this without massive subsidies and interference from the federal government. On the other hand, our “efficient, cost effective” government-managed system led to a massive housing bubble and collapse that millions of Americans are still paying for. Heritage Foundation Senior Research Fellow Ron Utt comments:
At the moment, the federal government is the mortgage finance market. Today, what passes for the private-sector mortgage market is little more than a government-fostered concentration of private contractors earning attractive fees for their limited but lucrative role in the new federal mortgage finance system.
The Progressive Corporatist partnership between the Obama administration and a few of the nation’s largest financial institutions represents a fundamental threat to our nation’s economy. Economic freedom is the key to a vibrant, innovative and growing economy. But, for the first time ever in 2010, the United States fell from the ranks of the economically “free,” as measured by The Heritage Foundation’s Index of Economic Freedom largely due to the TARP bailouts. Restoring the United States to a “Free Economy” must be one of the next Congress’ top priorities.
- After prompting NPR to fire Juan Williams, George Soros-funded Media Matters is now targeting NPR’s Mara Liasson for her relationship with Fox News. George Soros also recently gave $1.8 million to NPR.
- Using your tax dollars to fund an 11th-hour spending boost, the American Federation of State, County and Municipal Employees is now the biggest outside spender of the 2010 elections.
- President Obama’s Department of Homeland Security has decided not to continue work on the U.S.-Mexico virtual border fence, leaving only 53 miles of unreliable coverage along the nearly 2,000-mile border.
- Senate Majority Leader Harry Reid (D-NV) told MSNBC last night: “But for me, we’d be in world-wide depression.”
- Join Gov. Tim Pawlenty (R-MN) at noon today for a interactive Facebook Townhall with Heritage Action for America.