Good commentary from the Washington Examiner.  The President either doesn’t understand the cause of the financial crisis, or just doesn’t care.   Fannie and Freddie are the GSA’s (Government Sponsored Agencies) that played a major role in the collapse of the housing market.  They continue to drain billions of taxpayer dollars and yet the executives are rewarded with millions of dollars in bonus checks.  Where is the outcry about the greedy government sponsored Fannie and Freddie executives?        

Obama to reinflate housing bubble

Examiner Editorial
December 29, 2009

Has President Obama learned nothing from the collapse of Fannie Mae and Freddie Mac, the government-guaranteed mortgage giants? Has he learned nothing from the broader collapse of the housing market, caused in large part by the rotten mortgage securities that these two firms churned out and sold to investors over the last decade?

Instead of learning from those sorry spectacles, Obama has bought into his own false narrative about some imaginary deregulatory action causing the economic collapse of 2008. Hence his baffling decision, cleverly buried in the Christmas Eve news dump from the White House communications office, to remove the $400 billion cap on federal loan guarantees for Fannie and Freddie.

Obama’s decision is particularly disturbing for two reasons. First, taxpayers have already sunk $111 billion into the Fannie-Freddie bailout in just the last few months. The removal of the $400 billion cap suggests that things are about to worsen considerably. Second, it was precisely such government guarantees that caused the housing bubble and economic collapse in the first place.

In 1999, when Fannie Mae initially began securitizing subprime mortgages in a pilot program, American Enterprise Institute’s Peter Wallison predicted in the pages of the New York Times that a massive bailout would eventually be necessary. Wallison’s warning was ignored by President Clinton and the Republican-controlled Congress, which together allowed the pilot program to expand year after year. The process continued under President George W. Bush, with loan standards being steadily lowered by Fannie and Freddie in their effort to give 55 percent of their mortgages to families at or below the median income level. The economic carnage of politically motivated mortgages surrounds us now.

Today, Wallison points out that nearly two-thirds of the nation’s subprime and otherwise bad loans were created, securitized, backed by, and/or required by various programs within the United States government, including Fannie and Freddie, the Federal Housing Administration, Ginnie Mae, and the Community Reinvestment Act. Ten million of these 17 million dicey mortgages — or about 40 percent of the nation’s subprime and otherwise low-grade mortgages — were either owned or securitized by Fannie and Freddie when they collapsed last year.

That Obama would now give these two companies a blank check is incomprehensible. Taxpayers got another thumb in the eye when Fannie and Freddie chose the same Christmas news dump to announce $42 million in bonuses for 12 top executives — obviously for their excellent work last year as they drove the ship into the iceberg. Keep that one in mind the next time you hear Obama feign outrage over Wall Street bonuses.