Industry Seeks Fannie, Freddie Overhaul

WSJ ^ | 9/2/09

[FromLori]

A mortgage-industry trade group is calling for Congress to transform Fannie Mae and Freddie Mac into several smaller privately held companies that would issue mortgage securities carrying an explicit government guarantee.

Some foreign investors in China and elsewhere lost confidence in that fuzzy implied guarantee last year and reduced their holdings of the companies' debt, though the U.S. government has propped up Fannie and Freddie with capital infusions.

"If we're going to restore and maintain investor confidence and...consistent liquidity, that is going to require an explicit backstop," said John Courson, chief executive and president of the MBA.

Shares of both Fannie and Freddie fell by more than 17% Tuesday in New York Stock Exchange trading. The price drops followed a Monday report from FBR Capital Markets that said there is "no fundamental value remaining" in the companies' shares.

The MBA's plan calls for government agencies, rather than the new companies, to assume the "mission" of promoting affordable housing that Congress has long assigned to Fannie and Freddie.

[Freddd]

but when former President and Senator McCain called on Congress to reign in fannie and Freddie, Barney Frank said there was no problem !!!! Along with Maxine Waters, Charles Schumer, Chris Dodd and the list goes on...

[p. henry]

Why should the mortgage market have a federal guarantee? Here’s a novel idea. How about using underwriting standards that stand on their own. Make loans to debtors and on terms that satisfy traditional models. All a federal guanrantee does is allow banks to make loans to debtors who are substandard risks and/or on novel terms. The transfer of risk from lenders to the taxpayer is what got us into our current mess. Why make it even worse with an explicit federal guarantee?

[SERKIT]

Raines, Gorelick, Johnson became fat-cats via Fannie