The Great Recession, for the most part, was caused by the mortgage industry and very few were more guilty than Fannie Mae and Freddie Mac. Now that the economy is recovering, President Barack Obama is calling for us to wind down the two large government backed mortgage companies. In a speech he made on Tuesday in Phoenix, Ariz. the president stated:
“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was ‘heads we win, tails you lose.’ ”
The president called for bipartisan legislation to completely overhaul the way the mortgage industry currently operates. According to nytimes.com:
“Under Mr. Obama’s principles, which he said were reflected in the Senate bill taking shape, Fannie Mae and Freddie Mac would further shrink their portfolios and lose the implicit guarantee of a federal government bailout. Instead, private investors would be most at risk, with the government a secondary guarantor.”
The President even poked fun at right wing extremists that call him a socialist stating:
“First, private capital should take a bigger role in the mortgage markets. I know that sounds confusing to folks who call me a socialist, I believe that our housing system should operate where there’s a limited government role,” he added, “and private lending should be the backbone of the housing market.”
In his speech, President Obama also called for the reform of not just home ownership but also rental property as well. The President echoed sentiments that I firmly believe about home ownership stating:
“In the run-up to the crisis, banks and the government too often made everyone feel like they had to own a home, even if they weren’t ready and didn’t have the payment. That’s a mistake we shouldn’t repeat. Instead, let’s invest in affordable rental housing.”
Now that President Obama has laid out a common sense plan on what to do with Fannie Mae and Freddie Mac, we’ll see if Congress can put their heads together and actually get something done for a change.
Check out President Obama’s speech below.