A Thing of the Past: Government-Backed Mortgage Market?

In today’s Wall Street Journal, Nick Timiraos has written an article, appearing on page A4, entitled White House Plans to Revamp Mortgage Market: Administration Proposal to Recommend Eliminating Fannie and Freddie, Curbing Government Role in Housing Finance.

The Great Recession (which still persists) has caused Americans – politicians and businessmen, constituents and academics – to examine how and why the Great Recession happened and what America can do to avoid a repeat. Of course, many point to the housing bubble as the primary cause of the Great Recession. Not surprisingly, there are proposals to modify how home mortgages are refinanced.

Mr. Timiraos reports the following in the 1st four paragraphs of his article.

More than two years after the government seized Fannie Mae and Freddie Mac, the Obama administration will recommend phasing out the housing-finance giants and gradually reducing the government’s footprint in the mortgage market, according to people familiar with the matter.

The administration is expected to include three options for a post-Fannie and Freddie world when it releases a long-awaited proposal for the future of the nation’s $10.6 trillion mortgage market, which could come as soon as Friday. Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.

The White House’s “white paper” will begin what promises to be a prolonged and fiery debate about the future of how homes are financed across the U.S. Any wind-down of Fannie and Freddie would happen gradually to avoid roiling markets, and the central, unanswered question is what kind of federal function, if any, the administration and Congress will invent to take their place.

Steps to reduce the government role in the mortgage market likely would raise borrowing costs for home buyers, adding pressure on the still-fragile U.S. housing markets. Consequently, analysts believe any transition could take years and would be driven by the pace of the housing market’s recovery.


The future of financing homes, I know what the landscape shall resemble. Medieval Europe – many serfs, not owning anything and with handfuls of lords reigning over the serfs. The American dream of home ownership – DEAD.

America is a land of the haves and the have-nots. If the federal government completely abandons any role in the housing market or substantially reduces its role, the number of individuals buying homes will drop dramatically.

I am NOT opining whether the federal government’s role in financing the mortgage market is good or bad. I am realistically and pragmatically evaluating the consequences of a substantially reduced or non-existent role by the federal government. Yes, serfdom in America is where the have-nots are headed (but at least they will be mobile, can move from location to location where the jobs are because they won’t be bogged down to one location because of a mortgage).



  1. Kirsten said,

    March 8, 2011 at 11:03 pm

    Yes, but when the serfs retire on their oh-so-tiny savings and even smaller social security payments, how will they afford rents that go up and up each year when their retirement budget does not?

    • March 9, 2011 at 7:49 pm

      So true, so true. We, the serfs, are screwed whether we are homeowners or renters!

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