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The median voter theorem
John A. Courson, chief operating officer of the Mortgage Bankers Association, a trade group, also pointed with relief to the statement by the Treasury secretary, Henry M. Paulson Jr. on Sunday morning that Fannie and Freddie would examine the fees they charge banks for loan securitization services, “with an eye toward mortgage affordability.”
Don't they...um..."need the money"? And:
“The government doesn’t have a great deal of interest in foreclosing on a ton of homes,” said Kurt Eggert, a law professor at Chapman University in Orange, Calif., and a former member of the Federal Reserve Board’s Consumer Advisory Council.
And:
While it is not yet clear whether stockholders in Fannie Mae and Freddie Mac will be wiped out entirely, Mr. Paulson did say on Sunday that the entities “will no longer be managed with a strategy to maximize common shareholder returns.”
That's some theorem. Here is the article.
Posted by Tyler Cowen on September 7, 2008 at 10:09 PM in Television | Permalink
Comments
The common shareholders remain, the preferred remain (though subordinated to the U.S. government), and the checkbook remains.
Privatize the profits (though at least without pretending that EBIT is profit) and socialize the risk.
FNMA has the best data available for risk management and risk analytics. If we assume they behave optimally, then the current charges (which, btw, didn't cover the current costs or they wouldn't be in this mess; thank you David "son-of-Roger-acts-like-Harry" Mudd) are the minimum that would be reasonable.
Since someone appears not to be assuming that, the hole you think was just burned in your pocket...was just burned in your pocket. And Daniel Davies's Three Laws abide.
Posted by: Ken Houghton at Sep 7, 2008 11:44:22 PM
So we're STARTING with the GSEs now being run with the purpose of further reducing interest rates for home buyers... where will we end up? What happens in 3 months time if you have Congress and the Presidency controlled by the Democrats (as is likely the case)?
Whatever the flaws of the previous system... I worry that this has the potential to rapidly morph into an instance of socialism: government ownership of industry (in this case, the mortgage business).
Posted by: mgunn at Sep 8, 2008 12:06:02 AM
I agree with you mgunn, seems like the US is about to take a big leap in the direction of Europe in socialism these coming years.
Posted by: Sune at Sep 8, 2008 5:00:53 AM
Are there historical examples of something like this that could inform us about the likely results? I have this vague sense that the mortgage market will now be far more susceptible to political pressure, whether that's lending more to minorities, or not foreclosing on homes of out-of-work steelworkers, or helping realtors and developers inflate property values in some regions. But I'll admit I'm just out of my depth with this.
Posted by: albatross at Sep 8, 2008 1:47:47 PM
Wait wait...
Congress and mortgage executives use two government sponsored entities to make horrible business decisions. As a result, the US mortgage market is tumbling into the abyss. Now the government can step in and take over a large portion of the economy...
This sounds strangely familiar.
http://www.naomiklein.org/shock-doctrine
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