Insider

Guest Post: Fannie and Freddie - The Exit Doors are Shut

Wednesday, August 18, 2010, 8:01 PM
Enroll NowFor enrolled members only. Enroll or Sign in to read the full article.
by Ilargi of The Automatic Earth

This post is one in a series from respected guest commentators while Chris is at work on his new book. Please welcome them to the PeakProsperity.com community and enjoy the fresh perspective.

From a purely political point of view, it’s a simple story.  Existing homeowners are a far more powerful force at the voting booth than potential owners, homebuyers, are.  It’s therefore very much in the interest of the incumbent government to keep home prices as high as it can.  Let them slide too much and you will pay for that at the next election.  For potential buyers, you can devise plans that lower interest rates and down payments, but that's all.  More affordability simply through lower prices is not on the political table.

Still, in the "listening conference" on US housing policies - Fannie Mae and Freddie Mac in particular - that started this week, it's not voters who have the biggest say.  That is reserved for the financial industry, and how could it not be?  Not that the Obama administration has to hear the truth from the bankers anymore:  Washington has long since realized that truth.  Which is that without Fannie and Freddie and the 80% stake the US took in them in 2008, as well as the unlimited financial guarantee issued by Tim Geithner at the end of 2009, it's not just the housing industry that would instantly collapse.  The banking industry would, like a shadow, rapidly follow in its footsteps.

 

Enroll Now
Or Sign In with your enrolled account.
Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »

 

Related content

10 Comments on Guest Post: Fannie and Freddie - The Exit Doors are Shut

Enroll now or Sign In to read all member comments.