NYT is reporting the "details" of the admin's current thinking on what to do with Freddie Mac and Fannie Mae.
Here are the alternatives, broadly
The first option would eliminate any government guarantee for middle-class mortgages.
Under the second option, the government would offer guarantees to investors mostly in times of financial distress, preserving a steady supply of loans but not reducing interest rates in good times.
The third option comes nearest to the current system. The government still would guarantee a broad range of mortgages, but only if lenders first purchased a guarantee from a private insurer. That would limit the government’s exposure — but also the effect on interest rates.
Offering conditional guarantees won't work. I have yet to see the mechanix of such a plan, but I can promise it won't work. The trouble is a "tipping point" problem, as well as a sheer size of the market participation problem."Mostly in times of financial distress" is just another version of "Too Big Too Fail." Anyone else thinking that way?
Screwing the middle class? That sounds like a good option for these guys. After all, they're doing all they can to screw the middle class already.
Note that they're also looking at the mortgage interest deduction - again, going after the middle class. That's one of the last tax breaks available for folks as their income increases over their career. But... that's for "the rich" I guess.
It will be interesting to see what comes out of this, but I'm not hopeful. Politicians are reluctant to do anything without a glaring crisis, and we'll have this one soon enough. At that point it becomes a rescue operation, and they think
