Congressman Barney Frank has been calling for the end of mortgage giants Fannie Mae and Freddie Mac over the last two days, running around like a man on a mission to every talk show that will listen to him, proclaiming that these two public-private partnerships have failed and need to be abolished.
Of course he neglects to mention a few key facts about Fannie and Freddie and Barney you really need to know.
Fan and Fred have cost American taxpayers $160 billion so far and the continuing red ink has no end in sight.
F&F now control more than 91% of the U.S. secondary mortgage market. So an end to them must mean a beginning for something else, right?
And of course that is what Mr. Frank is proposing. Not a hybrid public-private partnership for the mortgage market like F&F were originally designed to be but a PUBLIC option. Think ObamaCare for residential real estate.
The idea of Barney Frank preaching on the failures of F&F is beyond absurd, like Alice in Wonderland on a bad LSD trip. It was Barney Frank and Senator Chris Dodd who expanded the role of Freddie and Fannie to encourage low income home ownership. They are responsible, in part, for much of the mortgage meltdown mess the nation has experienced over the last few years. They screwed up and now blame everyone but themselves.
You would think these guys would have learned a lesson on what happens when the Federal government gets involved in a private capitalist market like real estate.
Instead, these two just wrote Mr. Obama's financial reform bill.
The mainstream media who loves Mr. Frank also fails to mention at the same time Barney was promoting for the rapid expansion of F&F he was "married" to a senior Fannie executive named Herb Moses. Mr. Frank's personal life is his own but the conflict of interest here is blaring and notice how the mainstream media never mentions it. (If it was a Republican dating a woman, it would be Page One news, of course.)
F&F have wallowed in accounting scandals for a decade now. I remember urging investors to short the mortgage twins back in 2005 and I was right. Mr. Frank is correct that F&F need to go. The question is what replaces them? In the current political climate it is not going to be a private organization like the NYSE or the CBOT but instead just another huge Federal bureaucracy destined to run America's mortgage market like the Post Office delivers the mail.
Robert J. Abalos, Esq.