The Wall Street Journal’s Political Diary (subscription only) reports on more mortgage shenanigans by “Government Sponsored Enterprises” Fanny Mae and Freddy Mac:
Why is Congress encouraging federal housing agencies to engage in the same kind of reckless home lending policies that created the subprime market meltdown in the first place? That’s a question Florida Senator Mel Martinez, who previously served as HUD secretary, has been asking but the housing industrial complex is putting up a fight.
We’re speaking here of the massive expansion in the federal government’s role in insuring home mortgages through the Federal Housing Administration and the two giant housing Government Sponsored Enterprises, Fannie Mae and Freddie Mac. Congress last month expanded by up to $3.6 trillion the new mortgages that can be underwritten by Fannie and Freddie. With a stroke of the pen, Uncle Sam will become the biggest holder of subprime loans on the planet. Their total liabilities already exceed $6 trillion — greater than the GDP of all but a small handful of nations.
And the taxpayers are on the hook for this mess.
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Freddie and Fannie do not back sub prime mortgages. They set the standards that make sub primes what they are. You need to look towards the Bush Administration’s decision to relax rules on borrowing guidelines back in 2000 after they stole the election. There is where the problem started. If it wasn’t for Freddie and Fannie, half of the legitimate borrowers in this country would still be renting. Just like a lot of our friends in Germany right now.
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