Barney Frank Looking to Dismantle Fannie & FreddieMonday, January 25, 2010
Financial Services Committee Chairman Barney Frank (D-Mass) is looking to do away with Fannie Mae and Freddie Mac, the government chartered institutions that securitize mortgages. Mr. Frank's intention is to improve the oversight and regulation of this industry but unfortunately, he has no plan for how to replace these vital organizations if removed.
The purpose of Fannie & Freddie is to securitize mortgages so that they may be traded in the secondary market, freeing up bank/lender funds to loan more money to home buyers. This process keeps the market liquid and allows for the demand of borrowers to be met. Of course there might be a better way to conduct this process, but until one has been developed and purposed, let's hope we stay the course and not run into new issues in the housing market while we are still inching our way toward a recovery. In addition, making this announcement will only damage the stock value of these companies; totaling 5.4 trillion in bond assets and 1.7 trillion in unsecured debt.
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