Tim Geithner tells Freddie and Fannie to change their tune

Treasury Secretary Timothy Geithner called for changes to be made in the US mortgage market at a recent press conference. He didn’t announce any regulatory deadlines or strategies, though. It is predicted he will be telling Fannie Mae and Freddie Mac to shape up in the next year or so or face the consequences. Geithner also made it clear the United States of America can’t afford to have to bail them out again and that they were too aggressive in taking on risk.

Geithner doesn’t have a game plan yet

As of now, there is no real plan in place for what to do about Freddie Mac and Fannie Mae. Geithner did, however, make it patently clear there were some things that would be happening. First, Fannie and Freddie will not be resuming business within the manner they were conducting it before the market meltdown. The two mortgage houses would also not be put in position to try and dominate the mortgage market. He was adamant the current mortgage industry, as it stands, is untenable, according to Reuters.

Little consensus on how to go about it

There is not much within the way of a consensus among industry insiders or economists on how to best reform the housing industry. Geithner did advocate retaining mortgage underwriting through Fannie and Freddie, as government backing for mortgages is a practice that all industrial nations participate it. Others, for instance co-founder of Pacific Investment Management, Co. Bill Gross, contend that completely nationalizing the housing industry is required at this point. Gross argues that the private market in mortgage underwriting and lending can’t make an effective return, according to Businessweek.

Something has to be done regardless of strategy

How to proceed with Freddie and Fannie is subject to wild speculation, but few think nothing should be done. The government has already, according to NPR, spent $ 150 billion on the mortgage houses. For the first half of this year, 89 percent of all new American mortgages were securitized by Fannie Mae, Freddie Mac, or Ginnie Mae . As opposed to Fannie and Freddie, Ginnie Mae securitizes only some mortgages, doesn’t lend to anyone, and is completely part of the US government.

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Reuters

reuters.com/article/idUSTRE67G3E820100817

Business Week

businessweek.com/news/2010-08-17/gross-urges-full-nationalization-of-housing-finance.html

NPR

npr.org/blogs/money/2010/08/17/129250765/socialized-housing-for-everyone