At a recent press conference, Treasury Secretary Timothy Geithner called for changes to be made to the way the mortgage market does business. He didn’t announce any regulatory deadlines or strategies, though. However, it is predicted that he will be telling Freddie Mac and Fannie Mae to get their houses in order within the next year. Geithner also reminded the audience the taxpayers cannot afford to pick up the check for the kind of reckless practices they have had to pay for again.
Geithner unclear on how to proceed
Freddie Mac and Fannie Mae have not been told to do anything yet. Geithner was essentially announcing a mission statement, and there were some things he made clear. The activities of Freddie and Fannie before the housing bust would not be reoccurring. The two mortgage houses would also not be put in position to try and dominate the mortgage market. He was adamant that the current mortgage industry, as it stands, is untenable, according to Reuters.
Little consensus on how to go about it
Industry authorities and economists haven’t come to any universal conclusions on how best to reform the industry. Geithner did support retaining some of the government backing of mortgages, as the richest industrial nations all have something akin to Freddie and Fannie for insuring mortgages against loss. Others for instance Bill Gross, who was one of the founders of the Pacific Investment Management CO., are arguing the mortgage industry has to be completely nationalized. The investment impresario, according to Businessweek, says the private market can’t mount much if any, of a comeback at all by this point.
Something needs to be done
How to proceed with Freddie and Fannie is subject to wild speculation, but few think nothing should be done. They have already cost taxpayers $ 150 billion, according to NPR. For the first half of this year, 89 percent of all mortgages of course in America were backed by Freddie Mac, Fannie Mae and Ginnie Mae. Ginnie Mae, in contrast to Freddie and Fannie, is wholly part of the United States of America government, sells mortgage backed securities only if they meet specific standards and doesn’t lend mortgages.
Additional reading
Reuters
reuters.com/article/idUSTRE67G3E820100817
Business Week
businessweek.com/news/2010-08-17/gross-urges-full-nationalization-of-housing-finance.html
NPR
npr.org/blogs/money/2010/08/17/129250765/socialized-housing-for-everyone
