The Foundry, Morning Bell: The United States likes to think of itself as a model of free markets. Unfortunately, in far too many sectors of the economy the reality is that the federal government already plays a huge role. Housing is a perfect example. The two Government Sponsored Enterprises (GSE) created to help the feds muck around in the housing market, Freddie Mac and Fannie Mae, already dominate the mortgage industry, handling more than 80% of all mortgages bought by investors in the first quarter of 2008. At the urging of politicians determined to increase homeownership rates, the Federal Housing Administration (FHA) has increased the number of exotic mortgages in its portfolio from 2% in 2000 to 35% in 2007.Don’t let anybody fool you, federal market intervention is at the core of the nation’s mortgage meltdown and the bottom lines of the government entities doing the intervening reflect it. If current mortgage default rates continue, the FHA will face a $1.4 billion deficit in 2009 and Freddie Mac and Fannie Mae already racked up $9 billion in mortgage-related losses last year and have another $19.9 billion in unrealized losses still on their books. So what are lawmakers doing in the face of these federal government failures? Like a degenerate gambler, Congress is on the brink of taking taxpayer money and doubling down. . . . Gamblers always seem to take bigger risks when they are playing with house money. Do the American taxpayers really want Congress playing this fast and loose with the U.S. treasury? . . . [Read More]
Tags: gambling, Heritage Foundation, Morning Bell, mortgage default, mortgages, The Foundry, US Congress To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
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