Obama Administration to Address Future of Fannie Mae and Freddie Mac

Financial reform was voted into law earlier this month, and although experts agree that although the move is the first step in the right direction, there are still many loopholes that need to be addressed. The treasury department announced that the Obama administration will be holding a conference regarding the fate of government backed mortgage behemoths Fannie Mae and Freddie Mac as the financial reform bill intentionally excluded these two lenders from the new provisions.
The content of the bill was developed to mitigate the risk of future financial meltdowns fueled by Wall Street as well as protect consumers from corporate greed courtesy. However, because of the complicated relationship between the government and Fannie Mae and Freddie Mac, the political bill purposely excluded the reform from affecting those businesses. Republicans balked at their exclusion from the law, but the Obama administration defends the move, as they wanted to wait until next year to develop a course of action for the organizations. The first meeting surrounding the issue is now officially scheduled for August 17, 2010 at the Treasury Department.
The relationship regarding Fannie Mae, Freddie Mac and the government is a jumbled mess. Fannie Mae was launched during the Presidency of Franklin D. Roosevelt. President Roosevelt and Congress created Fannie Mae in 1938 as a way to help aid the economy after the Great Depression. The company How Long Does It Take To Get A Business Loan was launched as a way to stimulate the failing real estate market. Fannie may bought up toxic mortgages from lenders so the financial institutions could then have liquid assets to loan borrowers. Eventually the move helped make homeownership a reality for many generations of Americans.
The success of Fannie Mae prompted President Lyndon Johnson to create Freddie Mac. President Johnson wanted to remove the Fannie Mae debt from government records as well as prevent the business into becoming a monopoly. The companies went public in 1989 clouding the waters. Public companies are responsible to shareholders while government is supposed to be for the people. The two lenders took calculated risks in the subprime mortgage industry to compete with Wall Street and return profits to their shareholders. It was that move that put the companies in financial dire straits.
For decades the government-backed lenders have been instrumental in making homeownership a reality for millions of Americans. Combined, the lenders own or guarantee more than 30 million home loans worth $5.5 trillion. That dollar amount is about half of the entire nations outstanding mortgage debt. It is that foothold into the average American household that required the government to bail out the bigwigs using $145 billion of taxpayer money.
Democrats intentionally excluded Fannie Mae and Freddie Mac from the new reform bill provisions as customized approach is needed to properly reform and rebuild the government backed entities. Treasury Secretary Geithner addressed the issue on a recent episode Objectives Of Financial Strategy of “Meet the Press” (NBC). He acknowledged that the big plan is to implement massive revisions in the mortgage industry as a whole. On the show he was quoted as saying “I think we’re not going to preserve Fannie and Freddie in anything like the current form.”
Although no major details regarding the fate of Fannie and Freddie have been discussed, Geither said the administration will consider “preserving or putting in place a carefully designed guarantee” with the goal for keeping the mortgage industry moving even in times of economic retraction.
The process of reform is slow and painful and can take several years to come to fruition. Until that time, consumers who want to buy a home will have to rely on the nation’s current mortgage opportunities to do so.

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