Sunday, November 19, 2006

Treasury To Tighten Fannie and Freddie's Faucets?

AP's Marcy Gordon writes that the Treasury Department wants to increase it's oversight of the two mortgage GSE's mortgage origination capacity.

My comment is, you can turn the faucet all you wish, but that won't reduce the source of the water. Fannie and Freddie are just the messengers (albeit messengers that deserve a bit of sanctioning, if their bookkeeping skills are a reason to judge.)

These mortgage packages are being marketed to Wall Street, as the article points out. As long as there is money on the Street, there will be places to put it. What is the classic adage? Supply creates its own demand? If Freddie and Fannie weren't there to soak it all up, it would just find another outlet. (Don't forget your classics, now.)

As usual, government is barking up the wrong tree. They'd do better to examine the process behind the creation of the monetary wherewithal to buy all of these marvelous 21st century products.

WrongTree
[Thanks to joe-ks.com for this great photo.]

4 Comments:

Blogger Idaho_Spud said...

http://www.washingtonpost.com/wp-dyn/content/article/2006/11/08/AR2006110801038.html

I find this entire thing unreal...

2:52 PM  
Blogger Katy said...

Yeah, but don't forget, the bigger the trough, the more, fatter, and meaner are the pigs. Not only are these gigantic government-sponsored entities too big and too powerful, but their diet is awash in inflated government-issued feed -- both directly and indirectly.

3:18 PM  
Blogger Idaho_Spud said...

Scary thought: According to the OFHEO these pigs are large enough to pose systemic risk to the banking system. By extension they pose risk to bond, derivatives, and worldwide equity markets.

And they can't/won't release their financials. I have been and continue to be amazed at the complacency about this.

3:46 PM  
Blogger Katy said...

mortgage fellow said:

"What are the pigs going to do next? That is the question."

6:04 PM  

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