This post was promised as a companion piece to (https://timhoward717.com/2014/10/05/light-of-truths-profound-effects-on-dc/ )
There still appears to be a bit of confusion regarding the republicans role in the battle over Fannie and Freddie I hope we can clear some of this up here. I realize that until now we have simply stated that the Republicans have always sought Fannie and Freddies demise due to their ideological beliefs.
To explain further, I want to discuss a portion of the proposed language of the bill the house Republicans passed out of House Financial Services by a unanimous Republican vote. The republicans proposed a requirement that would have raised the minimum down payment to buy a home from 3 to 10%. Now this would have been incrementally raised over time from 3 to 5 to 7 and finally 10. This reflects their philosophy that the actual person buying a home should have to assume a 10 percent first-loss position that the three other housing bills wanted covered by private capital. The Republicans feel that if someone can’t save the 10% to put down a home then why should people who can save that pay a higher interest rate to cover those who can’t. To some this may seem selfish to others it simply reflects personal responsibility. The other guiding principle that guides Republicans on this issue is their small government philosophy.They believe that the government has no business meddling in the mortgage markets. They would wipe out all of the mandates that have been established over decades to help ensure that Americas housing market is accessible to all Americans equally. Although it is widely viewed that a transition such as theirs would be devastating to both the housing market and the economy as a whole, they feel that these sacrifices would be worth it. They feel whatever pain we would have to go through to ween housing off of government involvement us is worth the sacrifice. I want to say here that this is America, and we are all free to follow our own political philosophies.
Now as far as what we can expect from Republicans as the final innings of our battle play out. More and more they are coming to terms with the fact that there is no way Fannie and Freddie will be eliminated in the next two years. House republicans realize that any housing reform bill that could possibly pass the Senate will offer them two bleak options.To vote in favor of the new improved big government home mortgage program or vote against it and essentially vote to keep Fannie and Freddie around. Many conservative groups referred to the Johnson/Crapo bill as Fannie and Freddie on steroids. Their strategy now is to feign a willingness to want to reform housing but truly they feel if they can run out the clock till 2016 their long-sought goal to eliminate Fannie and Freddie may finally be reached. Their current strategy to try and stall reforms until 2016 would spell utter disaster for our nations housing market and effectively shut many low to moderate home buyers out of housing for generations.Their “vision” for American housing would leave us about as close as one could get to an apartheid type housing policy.Most of them have doubts that the democrats will bypass legislation and release Fannie and Freddie on their own. I boldly predict that on this issue more than any other they will ultimately and finally be forced to accept that “elections have consequences’.
Although we are sympathetic and respect the Republican free market ideals that have a large emphasis on personal responsibility, we must look at reality. The reality right now is that currently we have a socialist state-owned secondary mortgage market which was brought about by the illegal seizure of two private companies by our government. To watch so many elected Republicans sit in silent complicity as this carries on makes one question your true values. We are not asking you to violate your ideals and support Fannie and Freddie or their equivalent. We are simply asking that you honor all of your ideals and join the 17 conservative groups in speaking out against the governments unprecedented and brazen attempt to illegally seize two private companies. (https://timhoward717.com//?s=15+conservative+groups&search=Go).
Now I just want to reiterate that our simple message of truth has reached the highest levels of power in America. Our thoughts can be seen throughout every discussion and debate. I was thrilled to see this letter to the editor published in the Washington Post: http://www.washingtonpost.com/opinions/common-stockholders-shut-out-with-governments-self-dealing/2014/10/10/65dab00c-4d8e-11e4-877c-335b53ffe736_story.html
“Common stockholders shut out with government’s self-dealing ”
“Indeed, the hedge funds that bought Fannie Mae and Freddie Mac preferred stock on the cheap make unsympathetic plaintiffs in seeking to halt the government’s claim to 100 percent of those companies’ profits. But what of the thousands of common stockholders, such as me, who also are taxpayers and who purchased their stakes years ago, when the stocks were far from cheap? Does the government’s 79.9 percent stake in Fannie and Freddie’s common stock really entitle it to 100 percent of the companies’ profits in perpetuity? If so, why did the government allow the stocks to continue trading? And though Congress granted the Treasury Department power to “salvage” the mortgage finance giants however it could, without judicial oversight, did it really mean to allow the government to change the rules once the companies reached profitability and turn a 10 percent dividend into a 100 percent profit grab? ”
We must continue writing letter’s like this holding our government accountable.
In closing, I want to note that I had a very productive discussion with Cliff Rossi last week. His paper outlining a clear/rational path out of conservatorship for Fannie and Freddie was an excellent step in providing a respected rational voice to the debate. I am sure some of his ideas will be utilized and look forward to working with him further.
Keep The Faith!