XPost: alt.gossip.celebrities, alt.politics.democrats.d, sac.general   
   XPost: alt.rush-limbaugh   
   From: epstein@clintonfoundation.org   
      
   We seem to be living in an era of the unexpected disaster: A   
   virus that suddenly shuts down the US economy and ends life as   
   we know it. A banking system that is at one minute solvent, and   
   the next on the brink of collapse.   
      
   Of course, such calamities are never totally unexpected. The   
   banking system was flashing warning signs about a year before   
   the worst of the 2008 financial crisis. The pandemic was   
   ravaging China before it came to the US, even if we were told it   
   would evaporate once the warm weather hit.   
      
   Here’s another so-called unexpected disaster flashing warning   
   signs that will have severe consequences for the American   
   taxpayer if (or when) it arrives: A massive new housing crisis   
   and the very real possibility of a significant economic collapse   
   in the years ahead.   
      
   And once again, the trigger won’t be some black-swan event that   
   comes out nowhere. Rather, it will come from the failure of   
   bureaucrats in the Trump administration and progressives with   
   the incoming Biden team to fix a duo of odd-sounding companies   
   that have been allowed to become the lifeblood of the US housing   
   market.   
      
   No one will blame you if you’re not fully briefed on the   
   business models of Fannie Mae and Freddie Mac. But their   
   defenders will tell you they are nearly as important as the air   
   we breathe because without them no one will own a home.   
      
   The reality is far different. Both were created by Congress;   
   Fannie in the Great Depression and Freddie some 30 years later   
   to help average people own a home by making widely available the   
   30-year mortgage. Along the way they both also became public   
   companies, serving shareholders as well as progressive   
   government housing policy.   
      
   This is where politics and economics don’t mix. You won’t find a   
   politician in America who isn’t for homeownership. The cheap and   
   fixed 30-year mortgages are the best conduit for it to happen,   
   they will tell you, though other countries — like Canada — do   
   just fine with mortgages under 10 years.   
      
   And what shareholder doesn’t want his company to make more money   
   even if it’s subsidized by ­Uncle Sam? No one cares that such   
   public-private partnerships often ­result in disaster for   
   taxpayers.   
      
   That’s the story of Fannie and Freddie, which fuels the housing   
   market by stepping in and buying those mortgages from the banks,   
   and transferring the banks’ risk to private investors after the   
   loans are repackaged into bonds, thus allowing banks to keep on   
   lending and spreading the gift of homeownership.   
      
   F&F made its money — and over the years they’ve made a ton of it   
   — by borrowing cheaply at government rates and selling bonds to   
   yield-hungry investors. For a while, everyone seemed to benefit.   
      
   Yet as we all know, this Pollyannish view of public policy and   
   economics didn’t play out or we wouldn’t have had the events of   
   2008.   
      
   Homeownership as a “right” always sounds good politically until   
   you unpack it economically. Fannie and Freddie handed money to   
   people who didn’t have the economic means to repay their loans.   
   They turned in enormous profits for shareholders only as long as   
   housing prices kept running higher, which of course they didn’t.   
      
   By the time 2008 rolled around, F&F (along with the banks) were   
   near collapse; private investors stopped buying their debt,   
   which sat on F&F’s balance sheet like a ticking time bomb.   
      
   The federal government decided to bail them out and take them   
   over because if they defaulted it would have had the market   
   impact of a tsunami. F&F’s interests were so closely aligned   
   with the federal government’s that it would have been tantamount   
   to a default by the US Treasury in the eyes of the investors we   
   need to keep financing our deficits.   
      
   After receiving tens of billions of dollars in bailout money,   
   F&F remained wards of the state through the Obama years. After   
   the Great Recession, they recovered and ­began making profits as   
   housing ­returned to normal.   
      
   But they also became a piggy bank for the Obama administration’s   
   vast expansion of federal government, and then went back to   
   their old ways of allowing banks to make loans to anyone with a   
   heartbeat and maybe no job.   
      
   Enter the Trump administration, namely Treasury Secretary Steven   
   Mnuchin, and Mark Calabria, head of the Federal Housing Finance   
   Agency, with grandiose plans to save the US taxpayer and the   
   housing market from a repeat of 2008.   
      
   For four years we heard how F&F were supposed to be made free   
   from government control, allowed to retain capital like a bank,   
   and become as safe and secure as any independent financial   
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)