subject: Reflections of the booming economy and the effect of it's wake [print this page] Reflections of the booming economy and the effect of it's wake
With Freddie Mac and Fannie Mae on the brink of shutting down their housing departments it leads to reflections over on the role of government and politics regarding the housing boom. The housing market was boosted by the idea of the American dream coming to fruition. The heartstrings of many Americans were pulled on with the discourse that everyone had the opportunity of home ownership.
The boom was propelled by all of those who benefited from loans being made. To name a few they were banks, credit unions, wholesale lenders, investors, realtors, builders, loan officers and homeowners. The market was saturated with buyers due to very loose guidelines. This resulted in an influx of real estate investors and future homeowners. This influx drove up housing prices. Real estate investors could turn houses within a few days of them being on the market. Pretty much anyone who wanted a loan could find a program that met their needs, at least short term. Obviously those who had the most to gain encouraged law makers to do all they could to keep subprime home loans going for as long as possible. Thus, policy makers were under tremendous pressure as those who fund their campaigns had great influence over the decisions that were to be made about homeownership. Lawmakers were encouraged by the increase in homeowners and turned a blind eye regarding the future impact of these loans. Thus the economy was booming. However, most everyone in the mortgage business new that many of the loans that were being made to folks would not be paid back due to the homeowners dismal credit profile and lack of resources. However, many turned a blind eye because of the profits rolling in. Investors purchasing these loans also new they weren't great loans but with government backing and the prospect of selling the loans to other investors at a profit encouraged the continuation of this behavior. Those in the mortgage business new it was only a matter of time until the bubble burst.
If those in the mortgage business new that the bubble was going to be burst then wouldn't Freddie and Fannie know as well? Freddie and Fannie has been a government regulated and sponsored enterprise. Freddie and Fannie guidelines were not the only ones to blame for the boom their were Alt A and subprime guidelines that were not regulated by Freddie and Fannie. However, Freddie and Fannie's guidelines have regulated the mortgage business for over the last 50 years.
With the prospect of the removal of Freddie and Fannie the government, who has played a legitimate role in all of this, is pretty much attempting to remove their hand from the proverbial cookie jar. Greed was the catalyst of our economic downturn. Now hard working Americans are solely left to burden the responsibility of stabilizing our economy. Justice has not been served in this matter. American's were toyed with at the prospect of realizing an American dream. The reality is that the guidelines were in place primarily to benefit those who were already very rich. If it weren't for greed we would not be in this mess. Now hard working middle class American families, who haven't gone into foreclosure, are the ones left suffering.
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