When is the Obama administration going to do something about Fannie Mae and Freddie Mac?
The two government-sponsored enterprises, which at their peak were buying up 44 percent of all new subprime mortgages in America, became penniless wards of the state before Obama’s inauguration. Nearly everyone agrees that they played a key role in destroying the financial system. Everyone says they need fixing.
Fed Chairman Ben Bernanke told Congress in February that it needs a GSE reform plan now: “The sooner you get some clarity about where the ultimate objective is, the better.” Sen. Mark Warner, D-Va., put it more bluntly this month, calling Fannie and Freddie “the big elephant in the room that hasn’t been addressed.”
If it hasn’t been addressed, that’s because the Obama administration has been kicking the GSE can down the road since Inauguration Day.
Early on, there were signs of a willingness to do something about Fannie and Freddie. On March 22, 2009, two months after Obama’s inauguration, White House economic adviser Christina Romer told CNN’s John King, “I think that [Fannie and Freddie] is certainly going to be an issue going forward. I think it should be part of the overall financial regulatory reform, to figure out what is the best way.”
On June 9, 2009, Treasury Secretary Tim Geithner testified before a Senate committee, calling GSE reform “an important challenge.” He added: “We’re going to begin a process of consulting with the Congress and a broad section of housing experts on what we think the range of options are. … But we’re going to defer recommendations on those things for a bit longer.”
How much longer? A week later, the White House published a white paper on financial reform. It promised “a wide-ranging initiative to develop recommendations on the future of Fannie Mae and Freddie Mac, and the Federal Home Loan Bank system.” A report on the matter would be presented “at the time of the President’s 2011 Budget release,” which typically occurs in February.
The president’s budget was released on Feb. 1, 2010, seven months after the promise that it would contain a plan for Fannie and Freddie. It didn’t. Nor did Democrats’ financial reform package — Rep. Paul Kanjorski, D-Pa., recently pleaded that it’s just “too complicated” to include.
OK — it can still be done separately. But when?
On Feb. 24, 2010, Geithner announced that there would be no administration plan for Fannie and Freddie until 2011. “We can’t do everything right away,” he explained, eight months after he was first asked about the topic.
Geithner did promise to “put out some broad questions and invite public comment on those questions. And then we’re going to use that process of outreach … to try to shape a set of legislative proposals we can present to the Congress next year.”
On April 14, two months later, the White House released seven questions on GSE reform for public comment. They were so basic that they could have easily been asked the previous June. For example: “How should the current organization of the housing finance system be improved?” And: “What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?”
In other words, nothing has been done about this since Obama’s inauguration. Nothing.
In the meantime, the treasury has twice had to increase the Fannie and Freddie bailout fund — first to $400 billion, then in December to … infinity (in theory, anyway).
Freddie and Fannie continue to cost the taxpayer — they reported first-quarter losses of a combined $20 billion. And no one knows what the future holds for the government subsidy upon which all homeowners are now dependent, even though they never asked for it.
This is, as Vice President Biden might say, a big bleeping deal. If only someone in the White House gave a bleep about it.
David Freddoso is The Examiner’s online opinion editor. He can be reached at [email protected].
