Home Mortgage Market Now Controlled by U.S. Government
During the financial crisis of 2008-2009, officials from both the George W. Bush and Barack Obama administrations joined Wall Street bankers to condemn calls from the Left to nationalize all or part of the banking system, which had failed spectacularly. But since then the government has quietly and almost completely taken over the U.S. home mortgage industry because banks and other for-profit lenders refuse to lend money to homeowners without the guarantees and other support the government provides.
In fact, about 90% of all new mortgages are backed by the government, three times more than in 2006. Fannie Mae and Freddie Mac, the taxpayer-controlled, semi-private housing giants, were saved with infusions of $187.5 billion of public funds starting in 2008, and now guarantee 69% of new mortgages, up from only 27% in 2006, while the Federal Housing Administration and the Department of Veteran’s Affairs back about 21% of mortgages, up from just 2.8% in 2006.
In other words, without government guarantees propping up home sales during the Great Recession, real property values would have sunk even lower than they did and the economic downturn would have been much deeper and longer lasting.
“It is creeping nationalization,” said Jim Millstein, an investment banker who worked in the Obama administration’s Treasury Department as the chief restructuring officer. Even banks and other lenders, both big and small, realize that without long-term government support the home mortgage market would collapse and trigger another recession. The question going forward—dodged by both parties during President Obama’s first term—is what to do with agencies like Fannie and Freddie and how to restructure the government’s role.
To Learn More:
We’ve Nationalized the Home Mortgage Market. Now What? (by Jesse Eisinger, Pro Publica)
The Obama Mortgage Settlement is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)
- Top Stories
- Unusual News
- Where is the Money Going?
- U.S. and the World
- Appointments and Resignations
- Latest News
- Battling Obesity in U.S., FDA Approves Sweeping New Rules for Calorie Disclosure
- In Blow to Climate Change Fight, EPA Prepares to End Alternative Fuel Program
- Feds Tell Nation’s Cops to Stop Illegally Seizing Motorists’ Property…But Only if they Want To
- Senate Committee Accused of Failing to Interview Men Tortured by CIA for its Torture Report
- U.S. Bombing in Syria Said to Drive More Anti-Assad Rebels to Join or Support ISIS