Last Call For Fannie And Freddie

In a speech on fixing our broken housing market given in Phoenix on Tuesday, President Obama called for the end of Fannie Mae and Freddie Mac, which pretty much ensures he's the Worst Socialist Ever(tm).  He had this to say about making the housing market stable again:

That begins with winding down the companies known as Fannie Mae and Freddie Mac. For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was “heads we win, tails you lose.” And it was wrong.

The good news is that there’s a bipartisan group of Senators working to end Fannie and Freddie as we know them. I support these kinds of efforts, and today I want to lay out four core principles for what I believe this reform should look like.

First, private capital should take a bigger role in the mortgage market. I know that must sound confusing to the folks who call me a raging socialist every day. But just like the health care law that set clear rules for insurance companies to protect consumers and make it more affordable for millions to buy coverage on the private market, I believe that while our housing system must have a limited government role, private lending should be the backbone of the housing market, including community-based lenders who view their borrowers not as a number, but as a neighbor.

Second, no more leaving taxpayers on the hook for irresponsibility or bad decisions. We encourage the pursuit of profit – but the era of expecting a bailout after your pursuit of profit puts the whole country at risk is over.

Third, we should preserve access to safe and simple mortgage products like the 30-year, fixed-rate mortgage. That’s something families should be able to rely on when they make the most important purchase of their lives.

Fourth, we have to keep housing affordable for first-time homebuyers and families working to climb into the middle class. We need to strengthen the FHA so it gives today’s families the same kind of chance it gave my grandparents, and preserves that rung on the ladder of opportunity. And we need to support affordable rental housing and keep up our fight against homelessness. Since I took office we’ve helped bring one in four homeless veterans off the streets. Here in Phoenix, thanks to the hard work of everyone from Mayor Stanton to the local United Way to US Airways, you’re on track to end chronic homelessness for veterans by 2014. But we have to keep going, because nobody in America, and certainly no veteran, should be left to live on the street.

Naturally, Republicans have already thought of this whole "wait a minute what if Obama calls our bluff on wanting to unwind Fannie and Freddie?  We should pass a bill that does that, only it's crazy."

A Republican-sponsored bill that would liquidate Fannie Mae and Freddie Mac and dramatically reduce the U.S. government backstop in the mortgage market was approved by a House of Representatives committee on Wednesday.

The House Financial Services Committee voted 30-27 largely along party lines to approve the bill. The split reflects a deep divide between Republicans and Democrats over how to remake the U.S. mortgage finance system, after the housing bubble burst and plunged the country into a severe credit crisis.

The House bill would abolish government-controlled Fannie Mae and Freddie Mac within five years and replace them with a non-profit, utility-like platform that investors would use to securitize mortgages. Unlike mortgage securities offered by Fannie Mae and Freddie Mac, the new securities would be issued without a government guarantee.

It also makes massive cuts to FHA loans and would basically eliminate 30-year mortgages overnight, leaving home ownership virtually unaffordable for the vast majority of Americans, but hey.  It gets rid of Fannie and Freddie!

Republicans are on it, folks.