Monday, November 24, 2008

Rewinding The Tape On Fannie & Freddie

While the most important cause of the housing bubble was Alan Greenspan's low interest rate policy, certainly the active political promotion of credit financed home ownership in general and minority home ownership in particular played a role too. This press release from the White House is not remembered today, because both Republicans and Democrats for different reasons wants to forget about it (Republicans don't want to remember that it was their president that pushed for this, while Democrats don't want to remember the role of their beloved institutions Fannie Mae and Freddie Mac was behind it), but for those of us who aren't either partisan Republicans or Democrats, this information is very relevant today. An excerpt (Do read the rest as Bush lists a number of other government subsidies to promote home purchases):

"And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system -- I introduced two of the leaders here today -- they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It's a commitment that conforms to their charters, as well, and also conforms to their hearts.

This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.)

Fannie Mae will establish 100 partnerships with faith-based organizations that will provide home buyer education and help increase homeownership for their congregations. I love the partnership. (Applause.)"

2 Comments:

Blogger Acton. said...

http://economistsview.typepad.com/photos/uncategorized/2008/09/24/gse.gif

DeLong, Thoma, and Krugman, our three keynesketeers.

12:38 AM  
Blogger stefankarlsson said...

That chart is misleading, because it does not appear to include the large number of mortgages that Fannie & Freddie back without directly owning.

8:18 AM  

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