Recently, Americans for Limited Government (ALG) interviewed former chief credit officer of Fannie Mae, Edward Pinto, to get his thoughts on how best to bring an end to Fannie Mae and Freddie Mac, the government-owned mortgage giants that helped cause the financial crisis, and to see what impact that would have on the housing market.
Pinto recently wrote an oped for the Wall Street Journal outlining his proposal, and also published a new forensic study explaining in indisputable detail how government policies, including those of Fannie Mae and Freddie Mac, the Department of Housing and Urban Development (HUD), and the Federal Housing Administration (FHA) helped to cause the crisis by weakening underwriting standards, lowering down payments, and generally degrading the quality of credit in the U.S.
“We got into this problem over 15 to 20 years through HUD, it’s going to take us time to get out of it because they’ve left us in a terrible mess. We need to back out of it just like one backs out of any alley,” Pinto said, explaining that it must be done “slowly and deliberately.”
Pinto noted that securities sold by Fannie Mae and Freddie Mac are only selling for a slightly higher rate than treasuries right now. “The spreads are narrow to Treasury because they’ve got the unlimited backing of the federal government. They’re not explicitly guaranteed by the federal government, but there is no limit on the amount of money that the Treasury can give to Fannie and Freddie to back them.”
Get full story here.
No comments:
Post a Comment