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LETTER TO THE EDITOR: Fannie-Freddie ‘fix’ will bring 2008 redux
The suggestion in “Obama supports elimination of Fannie, Freddie” (Web, Aug. 7) that the president suddenly favors free-market solutions prompts deeper examination of this article. The suggestion that “private banks and investors” were actually the driving force “before the crisis” offers an opening clue that likely much of what the writer “knows” is incorrect, raising further need for a careful read.
Lifting apart the facts presented from the author’s suggested conclusions offers a more realistic picture. What President Obama and Senate Democrats are actually pushing is elimination of a “Government Sponsored Entity (GSE),” privately capitalized but government-backed, in favor of a new, fully-government entity like the Federal Deposit Insurance Corporation (FDIC). Of course, the first casualty is to be the current private investors dumb enough to trust involvement in a congressionally micromanaged GSE with a history of being driven insolvent by said “guidance.”
The replacement, a “government utility,” in the words of Sen. Bob Corker, Tennessee Republican, then fully controlled by the federal government, is expected to become the controller of all mortgages, not just a higher-tier purchaser of them. Further, the hint is offered that it is to be funded like the FDIC through tithes from those lenders, creating another executive organization leeching directly off public corporations rather than appropriations from Congress. It was also mentioned in passing that this new entity will use this direct control and revenue tap to “redistribute” wealth by promoting “fair housing,” the theme of congressional micromanagement of Fannie and Freddie that actually led to the housing crisis.
This “reliance on private capital,” then, is simply a shift in federal control of capital closer to the source — and fully consistent with the principles of Mr. Obama.
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