Examiner Editorial:President plans to reinflate housing bubble

Has President Barack Obama learned nothing from the collapse of Fannie Mae and Freddie Mac, the government-guaranteed mortgage giants? Has he learned nothing from the broader collapse of the housing market, caused in large part by the rotten mortgage securities that these two firms churned out and sold to investors during the past decade?

Instead of learning from those sorry spectacles, Obama has bought into his own false narrative about some imaginary deregulatory action causing the economic collapse of 2008. Hence his baffling decision, cleverly buried in the Christmas Eve news dump from the White House communications office, to remove the $400 billion cap on federal loan guarantees for Fannie and Freddie.

Obama’s decision is particularly disturbing for two reasons. First, taxpayers already sunk $111 billion into the Fannie-Freddie bailout in just the past few months. The removal of the $400 billion cap suggests that things are about to worsen considerably. Second, it was precisely such government guarantees that caused the housing bubble and economic collapse in the first place.

In 1999, when Fannie Mae initially began securitizing subprime mortgages in a pilot program, AEI’s Peter Wallison predicted in the pages of The New York Times that a massive bailout would eventually be necessary. Wallison’s warning was ignored by
President Bill Clinton and the Republican-controlled Congress, which together allowed the pilot program to expand year after year.

The process continued under President George W. Bush, with loan standards being steadily lowered by Fannie and Freddie in their effort to give 55 percent of their mortgages to families at or below the median income level. The economic carnage of politically motivated mortgages surrounds us now.

Today, Wallison points out that nearly two-thirds of the nation’s subprime and otherwise bad loans were created, securitized, backed by and/or required by various programs within the U.S. government, including Fannie and Freddie, the Federal Housing Administration, Ginnie Mae and the Community Reinvestment Act. Ten million of these 17 million dicey mortgages — or about 40 percent of the nation’s subprime and otherwise low-grade mortgages — were either owned or securitized by Fannie and Freddie when they collapsed last year.

That Obama would now give these two firms a blank check is incomprehensible. Taxpayers got another thumb in the eye when Fannie and Freddie chose the same Christmas news dump to announce $42 million in bonuses for 12 top executives — obviously for their excellent work last year as they drove the ship into
the iceberg.

Keep that one in mind the next time you hear Obama feign outrage about Wall Street bonuses.

editorialshousingObamaOpinion

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

Baseball Hall of Famer Willie Mays attends an event to honor the San Francisco Giants' 2014 World Series victory on Thursday, June 4, 2015, in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)
Willie Mays turns 90: San Francisco celebrates the greatest Giant

By Al Saracevic Examiner staff writer I couldn’t believe it. Willie Mays… Continue reading

Ja’Mari Oliver, center, 11, a fifth grader at Harvey Milk Civil Rights Academy, is surrounded by his classmates at a protest outside the Safeway at Church and Market streets on Wednesday, May 5, 2021 in support of him following an April 26 incident where he was falsely accused by an employee of stealing. (Kevin N. Hume/S.F. Examiner)
School community rallies behind Black classmate stopped at Safeway

‘When you mess with one of us, you mess with all of us’

A warning notice sits under the windshield wiper of a recreational vehicle belonging to a homeless man named David as it sits parked on De Wolf Street near Alemany Boulevard on Friday, Aug. 31, 2018. A proposed SF Municipal Transportation Agency law would make it illegal for overnight parking on the side street for vehicles taller than seven feet or longer than 22 feet. (Kevin N. Hume/S.F. Examiner)
SFMTA to resume ‘poverty tows’ amid calls to make temporary ban permanent

Fines and fees hurt low-income, homeless residents, but officials say they are a necessary tool

Income from Shared Spaces will provide financial resources to the San Francisco Municipal Transporation Agency, according to its director, Jeffrey Tumlin. (Kevin N. Hume/S.F. Examiner)
SFMTA director says Shared Spaces serves transit agency’s financial interest

$10.6 million price tag for program raises concerns among transit agency’s board members

A broad coalition of tenants and housing rights organizers rally at Stanley Mosk Courthouse to protest eviction orders issued against renters Stanley Mosk Courthouse on Wednesday, Sept. 2, 2020, in Los Angeles, CA. (Irfan Khan/Los Angeles Times/TNS)
Federal judge strikes down CDC’s national moratorium on evictions

David Yaffe-Bellany, Noah Buhayar Los Angeles Times A federal judge in Washington… Continue reading

Most Read