oldsuretyguy

Should Fannie and Freddie Be Buying or Guaranteeing Investor Mortgages at All?

It is apparent to me that there exists a huge conflict of interest between the GSE management and the public interest. The efficacy of management operations and the organizational model filled by the GSE'S was brought into question during the House hearings this morningl. The former heads of Freddie Mac and Fannie Mae were dissected by House panel members determined to uproot the causes of the US housing mortgage crisis and establish blame if possible. The heads of the GSE's steadfastly argued that their rolls, as they saw them, over the past few decades had not been measurably altered. They also argued however, that because of drastic changes in market conditions they were required to change strategies to obtain market "balance" and to produce an adequate rate of return for their shareholders(and presumably their bonuses). There in lies the conflict of quasi public bodies driven by a profit motive wherein management personally benefited from the profits of the companies. The GSE heads admitted that their annual bonuses were consistently higher than their salaries!!! There is a need for a buyer of low and middle income mortgages but the GSE model is a failure because through greed and poor underwriting, they fueled the cycle of distressed loan origination, subsequent distressed loan purchases and mortgage backed securities sales(much of which was purched with recycled petro dollars). The Saudies can't be too happy about that......Oh wait a minute, we bailed out Wallstreet didn't we?!