For those listening to the calls for winding down Fannie and Freddie this is the argument against ending winding down.
All the current legislation is to get out the government out of GSEs or create a new single agency.
However, the private sector is incapable of policing itself with any standards. The GSEs got in trouble not because they were buying bad Mortgage back securities. They got into trouble because they bailed out failing private sector Mortgage Back securities.
The money borrowed from the Treasury was used to bail out the private sector that lowered their lending standards because the Government was telling them to lend more and more to less fortunate people. People who had no means to ultimately pay back those loans. The government (IE Congress) covered up their role in the lowering of lending standards by using Fannie and Freddie to bail out the failing loan market...
Then they shifted blame to Fannie and Freddie. They shifted blame to the instrument that was used to save the housing market. The same institutions that were created in the 1930s to repair the housing market when they botched the lending standards before.
The same institutions that allow 30 year mortgages....
The same institutions which all the regulators to enforce banks to lend appropriately...
Now the latest legislation being proposed is to create something like Fannie and Freddie...but only be a single entity..
Uh oh...the reason there are 2 entities is because in the 1970s Congress determined that one entity would constitute a monopoly...
oops again.
And Congress wonders why they have a low approval rating...
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