In her first article, A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie, Morgenson showed, in gory detail, how Wall Street had labored mightily to take over the activities of the mortgage behemoths for their fun and profit. Mind you, it’s not as if they already take a big proportion of the savings from the mortgage guarantee for themselves now; you can see that in refis, where much of the benefit of the interest rate reduction is chewed up in fees and other charges. Her second article, Fannie and Freddie’s Government Rescue Has Come With Claws, discusses in depth how the Administration flagrantly violated the terms of its own bailout deal to hoover up the earnings from Fannie and Freddie for Treasury, rather than give shareholders the proportion they were due, and took other punitive measures that were contrary to the 2008 legislation that set forth how a conservatorship of Fannie and Freddie would work.
These pieces provide insight into the state of play with government sponsored enterprise “reform” and also as a case study of how banks influence government policy, and how eager the Obama Administration has been to take up their cause (not that a Republican or Clinton Administration would behave any differently).
Cynics may regard these two stories as a bit moot, since the banks appear to have lost the fight to take over the operations of the government sponsored enterprises, and the case over the alleged mistreatment of Fannie and Freddie shareholders is being adjudicated. But don’t mistake the fact that the story (save for Morgeson’s recap) is out of the headlines for the notion that the banks aren’t continuing to move forward. As Morgenson points out, they are working to see how much they can get the regulators to cede to them through administrative processes, meaning without getting legislation passed. And as a Congressional staffer stressed, the big financial firms are moving their game pieces into place so they can take up the fight again after the 2016 elections.
But Morgenson’s focus on the machinations of the banks and their allies in government resulted in her not incorporating the policy issues. And without an understanding the policy problems, it’s easy to draw the wrong conclusions about how we got where we are and what might be the best approaches going forward.
more at the link with a background summary:
http://www.nakedcapitalism.com/2015/12/the-continuing-fight-over-fannie-and-freddie-and-the-real-problem-of-us-mortgages.html
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