Completely insane idea.  Wall Street has already shown their complete ignorance in the ability to do anything concerning finance….they are nothing but a theft machine.

I wrote an article about this topic on Swarm The Banks.

http://www.swarmthebanks.blogspot.com/2011/01/barack-obama-could-recycle-his-absent.html

That would be unadvised, like letting the ‘fox into the hen house’. They can’t maintain their own house, as the financial collapse demonstrated.

It is such a stupid idea… that it will probably happen.
Adjust your thinking/investments accordingly!!

This is like giving the key of your house to the robber, and provide them with the tools to rob your home clean

This is what is happening right now with student loans. The tax payer is going to have to pay for these also.

I predict the banks will have their way. To big to fail is remains to big to fail and worse they appear to be getting bigger. Once again our elite elected failed the American people. Oh I forgot, they are funded by the same giants who want to slay us.

Amen! Finally an article that nails the exact cause of the mortgage crisis. Wall Street.

The GSE’s Fannie,Freddie and Ginnie Mae along with the Government insureds FHA, and VA have historically done and excellent job in building the best housing and home ownership market in the world. They know what they are doing. They have long been the envy of Wall St. and the political tool of Congress. LEAVE THEM ALONE !

Of course Wall St wants in. The GSE system really works. Decades of sound well underwritten mortgages loans along with well manages portfolios that created an excellent investment for the secondary investors.

Wall St. made an end run around Fannie and Freddie by creating their own mortgage system of easy to get loans. Poor underwriting standards, teaser rates, ridiculous loan to values, contrived investment ratings and insured by a system that mirrored the very essence of what insurance was not. High crimes I must say.And what resulted was a total failure.

There was so much toxic paper generated by the Wall St.  mortgage loan that it infected everything from the bottom up by inducing a fully masticised Cancer known as “Financial Carcinoma"into the entire mortgage system.

When the adjustable rate feature on these loans triggered, the borrowers ability to pay was compromised. This coupled with the $4.00 a gallon fuel cost sucked all the discretionary income from these fragile borrowers budget and the economy began to erode and eventually began to infect upper strata of the economy which then affected the entire credit industry….............

The best cure for this situation is to cut this cancer out of the system. This can be achieved by creating an agency to buy these loans at a percentage of value and began a consolidated, centralized effort to work out these problems. The main focus being to keep these borrowers in the homes. This is a must as it would stabilize the housing market. Then the actual loss could be spread to the offending parties…Perhaps Wall St., the big banks and the other associates who unleashed this travesty on our country as well as the rest of the world.

Globalization equal(ed)s lost good paying manufacturing jobs and the threat of more losses that have pushed those wages down considerably since the early 1990’s.
The search for more “innovative” ways for banks/financial houses to squeeze more and more profits to satisfy stockholders and investors compounded the problem.
“Wages” have not kept up with inflation (devaluation of the dollar) pointedly since the early part of the 21st century.
Greed compounded the fiasco.
Corrupt and ignorant politicians added to the mess.
Distracted citizens that put too much trust into their elected officials poured gasoline onto the fire.
Greedy leverage carried us to this point in time.
Logically, only comparative de-leveraging will undo the mess.
But, not only the American people, the politicians, the banks/financial houses and Wall Street are not prepared for the inevitable consequences.
So true, so that we will just keep stumbling along in the dark blinded by our own encompassing greed and fear.
Our continuing loss of good paying jobs makes this scenario a definite one.
There is no other.
Our political/financial system is broke.

I tend to agree with most of the above, however, I am not sure that much of it is not very forward-looking.  As I see it, the article, most basically, communicates a problem and one (completely egregious) market-based way to solve it: risk-free privatization (God forbid).  Nevertheless, the problem remains.

To a certain degree, guarantees are a good idea in that they could indeed stimulate the economy by reducing risk.  However, is it simple-minded of me to wonder whether federal guarantees must be all of nothing?

That is to say, instead of allowing WS to get involved here with ZERO accountability, could we not seek to offer “conditional” guarantees, which would offer federal guarantees only in the absence of some of the most market-abusive actions?  If, within “conditional” guarantees,  we draw a clear line, then we potentially would have a punitive mechanism in the event any of the investing firms cross that line.

The dogs should very clearly not be let in off the leash, but maybe they could offer something if they were leashed and house-trained

Just a thought.

Excellent points. However, Fannie and Freddie do not guaranty loans. There is what is called “implied guaranty” by the secondary market investors. This is only a perception. Fannie and Freddie use stringent underwriting guide lines which include a 20% down payment required from the borrower. If the borrower does not have the required down payment there is an insurance called private mortgage insurance PMI available. This insurance in offered by private companies. This insurance insures the top part of the loan to the investor that exceeds the 20% down payment rule.

Ginnie Mae on the other hand only buys loans from only the government insured agencies FHA, VA, and Rural Development. These government insured agencies all require that the borrower to purchase mortgage insurance called MI that insures the entire balance of the loan. This is required because the borrower can put as little down on a purchase as 3.5% FHA and 0% down on the VA and RD loans.

Real lawyers doing what the laws allow can stop this.
If there was no political interference !
Why is this a problem?