Thursday, April 21, 2005

Congress Won't Reform GSE's

Leave it to the Congressional Budget Office to tell congress the short route to fix the GSE's is to eliminate the subsidy. "CBO Director Douglas Holtz-Eakin, said the housing market no longer needs the parts of U.S. law governing Fannie and Freddie that Wall Street interprets as a federal guarantee of the companies' obligations."

"Therefore, those entities could gradually be relieved of the responsibilities and benefits of their current status as GSE's and required to operate as fully private organizations, which would reduce their risks and costs to the federal government."

Sounds perfectly reasonable to me. But hear the horror from the so-called reformers. "'I'm not pushing for the total privatization of the GSEs,' said Alabama Republican Sen. Richard Shelby, chairman of the Senate Banking Committee. 'The GSEs play a critical role in the housing market.'"

OK, Mr. Shelby, I have a long memory and when this thing goes sideways, you will be reminded that the US could have escaped billions, maybe trillions in liability.


At 6:09 PM, Anonymous Anonymous said...

The Savings and Loans Fiasco is peanuts, absolutely peanuts, compared to what we have here but EVERYWHERE. From Shangai, to Montréal, to Nicaragua, you have a mega real estate bubble. I have never seen this. You should also investigate what is going around the world. And somehow all theses bubbles are inter related. THIS BLOG IS FANTASTIC. Thank you !

At 6:21 PM, Blogger Ben Jones said...

What I find outrageous is that Freddie/Fannie are owned by stockholders. Why not let them bear the risk, since they get the profits. I am disgusted with congress and can't understand why the CBO's recommendation won't be implimented.

At 6:26 PM, Blogger Ben Jones said...

(You should also investigate what is going around the world. And somehow all theses bubbles are inter related)

I do try to cover the global bubbles and it is too coincedental that housing bubbles simultaneously spring up in such diverse places as New Zealand, South Africa and China, to name a few.

That point exposes the "bubbles are local" mantra we hear all the time as baloney. And if they are connected, lookout.

If you have links on overseas RE markets, please post them. I know we have several international readers.


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