Just like the man looking for his keys, President Obama is trying to solve the wrong problem by calling, as he did in his speech in Phoenix, for the end of Fannie Mae and Freddie Mac as we know it.
The White House, in its suggestions to reform the housing finance system, describes the government guarantee of “more than 80% of all mortgages” as “unsustainable” and says the president wants to “put private capital at the center of the housing finance system.”Instead of suggesting replacing Fannie and Freddie to restore the nation’s housing markets, the president should be proposing to return them to their original charters (without private investors) supporting the “plain vanilla” loans, which would not be profitable—or profitable enough—for private investment banks. Read the story of a Good Samaritan walking down the street one evening spotting a man on his hands and knees patting the ground.
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