The Obama Speech We’re Waiting For
Fannie Mae and Freddie Mac need to get the BP treatment.
The President: Good evening. As we speak, our nation faces a multitude of challenges. At home, our top priority is to recover and rebuild from a recession. Abroad, our brave men and women in uniform are taking the fight to al Qaeda wherever it exists. Tonight, I want to speak with you about a battle we’re waging against an enemy that is assaulting the very homes our citizens live in.
In September 2008, Fannie Mae and Freddie Mac imploded when their losses became unsustainable. In part because so many of our financial institutions relied on mortgage-backed securities based on bad loans, a housing crisis exploded into a financial crisis. And Americans continue to suffer from the effects. Unlike a hurricane or oil spill, where the damage is obvious to the eye, the damage wrought by Fannie and Freddie is much more insidious. As president, I have many smart people in my administration. But you do not need a Nobel Prize to know the problem here.
Fannie and Freddie bought mortgages offered by banks, which it then resold as mortgaged-backed securities. Banks liked this, because it meant more money to lend. In the name of enabling ever more Americans to own their homes, and encouraged by Congress, Fannie and Freddie expanded into ever more risky mortgages. In the end, these two companies helped send billions in loans to Americans who lacked the means to pay them back—while spreading risk throughout our financial system.
Associated Press“I have met with moms and dads who bought modest houses that were within their means—and now find their tax dollars going to bail out neighbors who bought bigger houses not within their means.”
Think of these bad loans as a nasty leak polluting our financial system. While most other large financial firms either have failed or are now recovering, the damage caused by Fannie and Freddie continues largely unabated. The Congressional Budget Office says that plugging these bad loans has already cost taxpayers $145.9 billion, making them the single largest bailout of all.
Make no mistake: We will fight Fannie and Freddie with everything we have got for as long as it takes. We will make these two government-created companies pay for the damage they have caused. In fact, we are going to make Fannie and Freddie pay with their lives. Tonight I’d like to lay out our battle plan going forward: (more…)
