When Washington, D.C. politicians propose to “fix” something, red flashing lights and alarms bells go off.
The latest “problem” that needs a “solution” is how to reform Fannie Mae and Freddie Mac. The top Democrat and Republican on the Senate Banking Committee, said this week they have agreed on a plan to kill the GSEs (the government sponsored agencies) and create another federal bureaucracy — the Federal Mortgage Insurance Corporation.
Why tear down Fannie and Freddie to create something that already exists?
The Senate committee chairman, Tim Johnson, a Democrat from South Dakota, and Mike Crapo of Idaho, the ranking Republican, are behind the latest scheme to replace Fannie and Freddie with something else. The only problem with their idea is that it’s not needed. Here’s what Crapo’s team put out.
However, the solution for Fannie and Freddie is really simple: take them out of conservatorship. Problem solved. Why? Because both Fannie and Freddie are making money! They are doing great. Just a couple of days ago, Bloomberg News reported that Fannie and Freddie projected $179 billion in profits. Why the rush to kill the golden goose?
The Crapo-Johnson plan faces many hurdles. First, considering this is an election year, nothing is going to get accomplished in 2014. Secondly, thousands of Fannie and Freddie investors are suing the federal government for losses incurred in 2008 when Fannie and Freddie were nationalized by the federal government. They are not thrilled with this news. Who’s going to make them whole?
Here are a few other concerns: Are U.S. taxpayers on the hook again for recreating Fannie and Freddie? What is the rush to suddenly reinvent Fannie and Freddie? Why not just take them out of conservatorship? Why do we need to create more federal bureaucracy?
Nobody is asking hard questions about this latest ploy to overhaul the GSEs. Maybe somebody should.