Sides to weigh in on Fannie, Freddie
TEXT OF STORY
Bill Radke: The Obama administration will hold a conference next week on the future of Fannie Mae and Freddie Mac. Academics and consumer groups will be there. So will other stakeholders, like banks. The big Wall Street banks make good money servicing Fannie and Freddie, and they’re doing all they can to guard their golden goose, as Marketplace’s Nancy Marshall Genzer reports.
Nancy Marshall Genzer: Fannie Mae and Freddie Mac buy mortgages and sometimes bundle them into securities. Banks help Fannie and Freddie sell those securities, for a fee. Banks also help Fannie and Freddie borrow money by selling bonds. The banks get a fee for that, too. Ka-ching! Mark Williams teaches finance at Boston University. He says some banks like things just the way they are.
Mark Williams: The status quo would be fine for banks. Any losses are being assumed by taxpayers.
That’s because the government guarantees the loans. But taxpayers can’t prop up Fannie and Freddie forever. So reforms are likely. And banks are trying to influence the debate. Kenneth Posner used to cover Fannie and Freddie as an equity analyst. He says some banks could actually profit if Fannie and Freddie played a smaller role.
Kenneth Posner: If the government’s not going to do everything that means the private sector has to step up. And earn a fair return, whatever that is.
Posner says there may be a way for banks to help guarantee housing loans. Right now, the government is almost the only source of backing for new mortgages.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
