Barney Frank isn’t the only one who can speak out
This week, Representative Barney Frank (D-MA) called for Fannie Mae and Freddie Mac to be “abolished” and spoke strongly of his notion that they should be done away with and that he would somehow construct their replacement entities. The idea of reform isn’t new, however- it was anticipated by all, but Frank’s bold statement has seen widespread attention. Just last week, Treasury Secretary Tim Geithner said in a PBS interview that it was not likely that the White House would consider addressing Fannie and Freddie this year (although the Senate would begin looking at the structure).
Freddie Mac CEO, Charles “Ed” Haldeman how previously called himself “a real Barney Frank fan” described Frank’s statement as “not helpful” during a Q&A session after yesterday’s speech. “I do get that he’s the decision maker but in this interim period, it wasn’t a great day for me, and it wasn’t a great day for our 6,000 employees who saw that headline,” he said.
Freddie Mac’s constructive response to Frank:
Haldeman pointed out several ways that Freddie Mac is vital to the mortgage industry:
- “The GSEs help make possible the 30-year fixed rate mortgage—of a kind and on a scale unique to this country. By giving families stability and certainty, this is a real economic asset for our nation.”
- “We are the constant liquidity provider—the source of almost three quarters of the liquidity to the mortgage market last year.”
- “We are the ‘backstop bid.’ That means our customers know there will always be a buyer for their loans—which gives them the confidence they need to keep lending in any environment and keeps prices more stable.”
- “We deal with innovation in the mortgage market better than a purely government entity.”
- “And we are an important counter-cyclical influence that stays in the housing finance market even when purely private capital has pulled out. This has been proven by the events of the last two years.”
In a 2009 shakeup, Freddie Mac had three empty executive roles for much of the year and changes in the industry have changed the landscape for the company drastically. Haldeman closed his speech by rallying for his beloved employees and noting that “because of Freddie Mac’s public purpose, we’re making decisions on MHA and other issues – without being guided solely by profitability – that no purely private bank ever could.”
Do you think as it stands that Freddie Mac (and Fannie Mae) should be abolished, regulated or left alone?
