Tags: Corker | reform | Fannie | Freddie

Sen. Corker: ‘Reform’ Fannie and Freddie ‘Out of Business’

Thursday, 03 May 2012 07:29 AM

By Dan Weil

The best way to eliminate the problems created by government-controlled mortgage agencies Fannie Mae and Freddie Mac is to eliminate the agencies themselves, says Sen. Bob Corker, R-Tenn.

The housing market has essentially become de-privatized, with Fannie and Freddie backing more than 90 percent of all mortgages as private investors shy away.

"The best way to deal with it [Fannie and Freddie] is to reform 'em out of business, but nobody really wants to do that." Corker tells Yahoo.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

He has introduced a bill to do so. But with the election coming up, "the administration doesn't want to deal with Fannie Mae and Freddie Mac this year," Corker says.

Two things must be done to right the housing market, he says. First, “you’ve got to attract private capital back into the market,” Corker maintains.

“Private investors have run from the housing sector because the rights and warranties they thought were part of securities they purchased haven’t been adhered to.”

And second, “you have to migrate down the guarantees the federal government is putting behind Fannie and Freddie loans," Corker says. That backing just distorts the market.

Others too see a need for the government to step aside.

It’s time to "test the withdrawal of a fully federalized system," University of Pennsylvania real estate professor Susan Wachter tells Reuters. “It's untenable for the U.S. to continue on a path in which we rely on a federal housing finance system."

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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