A little known provision of The Ryan Budget calls for abolishing Fannie Mae, and Freddie Mac. No tears shed for those guys, right? The size of the bailouts, the amount of corruption.
And then there's the size and length of the right wing propaganda campaign aimed at villifying them. Or, to put things in a different perspective, think about how much worse this downturn would have been if basically no one in the country had been able to take out a mortgage, for any purpose, since the financial system collapsed.
There's bad, and then there's worse, and Ryan, possessed of full knowledge, cynically proposes that, on the subject of homeownership, the 99% just simply abjectly surrender to the 1%. But, really, my main reason for bringing this discussion here is, that, looked at broadly, this simple, single, stealth proposal would qualify as easily one of the largest tax increases in history.
When FDR had Congress create The Federal National Mortgage Association (FNMA or Fannie Mae) housing markets in the country were still as frozen as ours would have been had he not done so. I would call that an FDR twofer, but the big banks (at least after we bailed them out), continued calling it government interference with "their" marketplace. How can it be fair for Fannie and Freddie to give middle class homebuyers lower interest rates than the big guys would do, if they were willing to lend at all at that time, which they weren't? Screw the national interest, that's a Democratic concept.
The whole rationale behind Fannie and Freddie (Government Sponsored Enterprises, or GSEs) is to keep mortgage money flowing by creating a middle position between bond investors and putative home buyers. The money flows from Wall Street down to Main Street, and the investment paper flows the other direction. The GSEs create guidelines for borrowers, and the folks working directly with making and servicing the loans, and the investors get a great investment. So great, in fact, that it's backed by the implicit full faith and credit of the federal government (most recently to the tune of no one knows exactly how many real billions).
But that implicit backing, of course, is the rub. Who in their right mind is ever going to lend money to Citibank or B of A for rates as low as Uncle Sam can and does get (for example, a 10 year Treasury bond is only paying 1.80% today, something at or below the inflation rate). Billionaires paying Citibank for allowing them to park their excess funds over there for 10 years just ain't going to happen.
Now that's a pretty bare bones explanation of the history and mechanics. Beyond that, suffice it to say that the GSE system delivered great mortgage loans to deserving folks of normal means buying normal houses to live in for several generations, and all was well. Sure, the big guys wanted more of the action but there were limits from Congress on who this "government benefit" could be bestowed upon, so they were at least still in the game (mansions, self employed borrowers who cheat on their taxes, speculators, etc.)
But then the day came when all of the financial markets deregulation stuff had fermented sufficiently that some back room computer/finance genius figured out how to swing huge profits off of making really ugly loans ("borrowers don't really need to make any repayments because the arrearages can go onto the back end of the payment schedule since real estate property values are guaranteed to keep rising as forecast") to very low quality borrowers ("hell, just do the deal, it doesn't cost you anything, you're going to make a profit in the end, and in between now and then you can use some of the money you're saving to try to pay down some of your bad debts"). Loans which Fannie, Freddie, and every old line mortgage underwriter in the world knew would never be repaid. And we now know that, aside from we taxpayers, no one ever threw even so much as a dime into the pot designated for making any real sense out of the whole fiasco.
The bubbles burst. The crash hit. The 99% suffered (and continue to). And the 1% waltzed away with their winnings. Obviously nothing wrong with that picture.
So, anyway, now the anti government types want to guarantee an encore, except that next time would have a bigger bubble and a harder crash because the cushion of government participation/stabilization in the less expensive portion of the housing finance arena would be eliminated. But, hey, the wealthy investors paying cash for "packages of foreclosure homes" today will be happy to swoop back in and sweep up the rest of the crumbs at that time.
And they'll have much more money to do it with because eliminating the GSEs would have exactly the same effect as putting a 2% or 3% "big bank tarrif" on each and every new home mortgage going forward.
"Cost of funds", you know.
Or so say the 1%!