The core of Obama’s proposal involves winding down mortgage finance giants Fannie Mae and Freddie Mac, which own or guarantee more than half of all U.S. home loans and are critical to keeping capital flowing to lenders and borrowers.
The two government-sponsored entities have drawn heavy fire for allowing people to take risks and buy homes they could not afford. A bipartisan bill already circulating in the Senate would wind down the two organizations, and Obama said the measure is in line with ideas he can support.
The administration wants to replace Fannie Mae and Freddie Mac with a system in which the private market buys home loans from lenders and repackages them as securities for investors.
The government would still play a role in housing markets by insuring or guaranteeing those securities – at a cost to investors.
“Private capital should take a bigger role in the mortgage market. I know that sounds confusing to folks who call me a socialist,” Obama said, inserting a dig at political opponents who paint him as a left-leaning liberal.
First, kudos to him for not fighting the wind-down of Fannie Mae and Freddie Mac-Barney Frank must be rolling in his ill-gotten gains somewhere. However, as any real free market fan knows, if the government remains involved in any way, the market isn’t being allowed to operate at its best. And that’s true even if all the federal monster is touching the process with is the very tip of one finger on its grubby little paws.
It should also be noted that President Obama has a history of giving a head-fake to the other side when he’s about to move in the opposite direction.
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