*** Phasing out Fannie and Freddie: Here’s some news out of the White House: “More than two years after the government seized Fannie Mae and Freddie Mac, the Obama administration will recommend phasing out the housing-finance giants and gradually reducing the government's footprint in the mortgage market, according to people familiar with the matter,” the Wall Street Journal says. “The administration is expected to include three options for a post-Fannie and Freddie world when it releases a long-awaited proposal for the future of the nation's $10.6 trillion mortgage market, which could come as soon as Friday. Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.” Can the housing market handle this? How Wall Street responds to this news today could impact which plan gets emphasized. Bottom line: This is a classic trial balloon leak.

http://firstread.msnbc.msn.com/_news/2011/02/09/6017144-first-thoughts-tea-party-defiance

The Treasury Department will propose three different options on Friday for phasing out troubled mortgage lenders Fannie Mae and Freddie Mac and overhauling the federal government’s role in the mortgage market, an Obama administration official said late Tuesday evening.

To replace Fannie and Freddie, the administration will offer a range of choices, including a newly created government guarantee for residential home loans, an extremely limited guarantee that could be expanded in the event of another housing meltdown, or the de facto removal of any federal mortgage backstop.

The Wall Street Journal first reported the plans on its website Tuesday.

The federal government assumed control of Fannie and Freddie at the height of the 2008 financial crisis, saddling taxpayers with the risks of a batch of subprime loans mostly issued before the Wall Street crash. The Federal Housing Finance Agency estimates that losses on those loans will run the government between $142 billion and $259 billion.

In the wreckage of the housing crash, Fannie, Freddie, and another government-sponsored enterprise, Ginnie Mae, underwrite 95 percent of all new residential mortgages, a share that will complicate policymakers’ efforts to extricate the GSEs from the mortgage market.

But that appears to be the administration’s plan. Speaking on condition of anonymity, the administration official said that the Treasury Department will propose the eventual elimination of Fannie and Freddie. The official confirmed that Treasury will also support lowering the maximum amount of a mortgage that Fannie and Freddie can guarantee, after lawmakers raised it on an emergency basis two years ago.

The move—and the decision to offer lawmakers a menu of options instead of a single, preferred solution—appears designed to deflect political pressure and to ease the transition away from Fannie and Freddie’s emergency role in the mortgage market. Republicans made the entities a bogeyman during the midterm elections.

http://www.nationaljournal.com/administration-official-treasury-to-offer-three-plans-to-phase-out-fannie-freddie-20110208

Just one point of accuracy. Fannie and Freddie are not lenders. They merely underwrite existing loans. That is how, under the lax regulatory environment of the Bush Administration, Fannie and Freddie can be considered as an enabling factor in the housing bubble.

Really?

September 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print

Same article and let us see what Mr Barney Frank had to say on the matter.

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print

http://firstread.msnbc.msn.com/_news/2011/02/09/6017144-first-thoughts-tea-party-defiance


First read!
This was from yesterday!

Invictus, I don't understand what your point is.

I think he's mad because Bush didn't act before the economy blew up.