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The Obama administration released it's plan for unwinding Fannie Mae and Freddie Mac today, and offered a set of alternatives on how to replace it. But the big takeaway is that the government will basically stop promoting homeownership, and it will likely especially remove incentives for reaching low-income families who might not otherwise be able to afford one:
Taken together, these measures would directly affect borrowers, by increasing the costs of buying a home. That would also make the loans more profitable and perhaps draw new competition from private firms.Other measures being pursued by federal banking regulators are aimed at reviving the markets where mortgages are pooled into investments and sold worldwide. The ability to sell mortgages to global investors provides financing for lenders to issue mortgages.It's far to ask whether we've been over-promoting homeownership, and, as Alyssa Katz does in the latest issue of the Prospect, what we maybe should do instead. Alyssa will have more detail on what happens after Fannie and Freddie on TAP Monday, but for the meantime, I'd like to point out what a symbolic victory this is for conservatives. Whether Fannie and Freddie should have been preserved probably wasn't considered lightly, but conservatives have been vilifying the agencies as the cause of the crisis since the beginning. They weren't, they were simply the last to ride a wave that started on Wall Street. That doesn't mean the weird private/public limbo in which they did business wasn't also a bad thing, but it does mean that conservatives will point to their demise as proof they were right.
