Josh Rosner emerged as the clear voice of reason at the AEI GSE discussion today. He offered the analogy of a recent car accident to explain the absurdity of GSE reform in the senate. After his fender bender he explained he had multiple options, the most obvious would be to simply get the repairs done at a body shop. The more extreme which is what he likens the Corker/Warner inspired Johnson/Crap bill to would be to build a new auto assembly plant and remanufacture his entire car. He sarcastically points out that only in DC could an idea this ridiculous ever gain traction. This simple little analogy explains current efforts very well. As we have pointed out, Fannie and Freddie functioned perfectly for decades, from the default rate perspective they have been the gold standard of the secondary mortgage market. To scrap them and recreate the wheel is absurd. The true intentions of these efforts were to try and steer Fannie and Freddies business to the very banks that in reality caused the financial crisis. Josh closed by making the point that much can and has be done administratively such as having Fannie and Freddie price risk more effectively as well as transfer risk to the private market.He stated how imperative it is that Fannie and Freddie be allowed to rebuild capital as the lack of capital stands as a huge threat to taxpayers. He also pointed out that after six years of trying we are still miles from being in a position to bring private capital back into the market. Several very basic tasks have still not been completed that would facilitate this.
Ed Demarco by all appearances seemed rather combative/defeated. Initially, he came across combative especially when discussing the mandates that ensure equal access to our housing market. His irrational attacks on the mandates show very clearly that one of his main goals in eliminating Fannie and Freddie was to kill the decades-old mandates. Like the governments legal arguments concerning the lawless third amendment, his arguments against the mandates were very Schizophrenic. Ed points out that Fannie and Freddie worked perfectly for decades, and it was the mandates that lead to the financial collapse. In trying to blame the mandates as the cause of the crisis he neglects the basic fact that the mandates have been around since the 1960s, they were fortified in the 70s as well as the early 90s. If the mandates were the problem how did Fannie and Freddie function so well for decades? By ignoring the true cause of the financial crisis Demarco’s arguments, vaporize when exposed to the truth. Ed’s long, brazen and corrupt plot to rid the world of Fannie and Freddie is unraveling right before his eyes and today I clearly saw a portrait of a man in defeat.
Besides the right wing conservatives like Peter Wallison, who were desperately trying to cling to the belief that Fannie and Freddie will soon be gone I saw a clear shift to the reality of a responsible Reform/release. Peter Wallison continually made reference to 2016. That somehow after 2016 reforms could take place. Think about this for a minute, what will change in DC regarding this in 2016? His obsession with 2016 revealed his hopes that this issue survives until the election of a Republican President and the inevitable destruction of Fannie and Freddie that this would bring. Peter I think you already suspect this but let me clarify for you and the rest of the right wing vultures who have been wringing your hands awaiting the death of Fannie and Freddie, elections have consequences and your twisted plot will fail. So please stop denigrating your reputation by telling such perverse lies about two of the greatest American Institutions that exist, Fannie Mae and Freddie Mac.