WHITE HOUSE PLANS TO WIND DOWN FANNIE AND FREDDIE
Congress will consider three suggestions.
Provided by Benedict A. Mitchell Jr.
A fundamental reform for the housing market. For two-and-a-half years, economists and housing industry analysts have wondered what would happen with Fannie Mae and Freddie Mac. On February 11, they got an answer: the Obama administration announced plans to shut down both of the troubled mortgage giants by 2018 or sooner.1
As he met with the press, Treasury Secretary Timothy Geithner cited the very broad consensus that the government should play a much smaller role in the housing market. Capitol Hill Republicans would agree, pointing to the $154 billion price tag for the 2008 bailout of both firms. (That is the Treasurys estimate.)2,3
The choices on the table. The Obama administrations white paper offers three proposals to Congress, with the hope of legislation emerging by 2014.1,2,4,5
The timeline. The Obama administration may be long gone by the time all this plays out, but here is the three-stage conception of how it will wind down both agencies.2,6
The big picture. By the end of this decade, it could be considerably harder to buy a home. If the government gets out of the mortgage market (or at least drastically reduces its role), a major influx of private capital needs to flow into the housing system to replace the federal subsidy, with the following possible effects:
Well have to wait and see how this all plays out, all while hoping it wont lead to a decline in home ownership.
Benedict A. Mitchell Jr. is a registered representative of and offers securities through Kovack Securities, Inc., member FINRA / SIPC. Advisory services offered through Kovack Advisors, Inc., a Registered Investment Advisor. 3350 SW 3rd Ave. Ste. 204, Ft. Lauderdale, FL., 33315. Tel: (888) 236-9894 Ext 1. Florida Benefit Specialists is unaffiliated with Kovack Securities, Inc. and Kovack Advisors, Inc.
This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.
1 money.cnn.com/2011/02/11/news/companies/fannie_mae_freddie_mac_white_house_proposal/ [2/11/11]
2 usatoday.com/money/economy/housing/2010-10-21-fannie-mae-freddie-mac-bailout_N.htm [10/22/10]
3 - cnbc.com/id/41529671 [2/11/11]
4 blogs.abcnews.com/george/2011/02/the-end-of-fannie-mae-and-freddie-mac.html [2/11/11]
5 nytimes.com/2011/02/12/business/12housing.html [2/11/11]
6 finance.fortune.cnn.com/2011/02/11/fannie-mae-the-long-goodbye/ [2/11/11]
7 cnbc.com/id/41533702 [2/11/11]
8 http://montoyaregistry.com/Financial-Market.aspx?financial-market=the-financial-security-rulebook-5-crucial-steps&category=3 [2/13/11]