Fannie and Freddie to Stay the Course (As if the Bailout allows any other)

 

Yesterday’s GSE hearing came and went with nothing special happening. There was no confirmation of earlier rumors that the system would order a mortgage rate reduction.

 

Instead it was status quo all the way. Geithner affirmed the government’s commitment to reflating the mortgage bubble and keeping housing prices artificially high.

 

Rather, Mr. Geithner — and the conference after his remarks — focused largely on drafting a new and improved version of the current system, in which the government subsidizes mortgage loans made by private companies.

Mr. Geithner said continued government support was important “to make sure that Americans can borrow at reasonable interest rates to buy a house even in a downturn.” The absence of such support, Mr. Geithner said, would deepen future recessions because unsubsidized private companies would curtail lending.

 

There were the same old lies about how inflating a bubble and then using the mechanism of the GSEs to provide lower-cost mortgages represents some “progressive” outcome.

 

The administration is still considering these and other options. The choice will reflect in large part a judgment about how hard the government should try to increase homeownership. Broader guarantees create greater risks for taxpayers, but also lower interest rates, bringing ownership within reach for more families.

Shaun Donovan, the housing secretary and a host of the conference with Mr. Geithner, said that the administration remained committed to “broad access to homeownership, including options for those families who have historically been shut out of these markets.”

 

Think about the double artificiality and manipulation here: first the banks use government to inflate a bubble, and then they use it to provide market access at prices which are artificially low over the short run. (Of course, as with any heroin dealer giving away a free sample, they intend to make you pay in the end.) So it’s a double affront to reality.

 

Reality, of course, wants to and will deflate. Housing prices remain far above their historical level, far above any relation to the real economy. But the bubble is a primary rent mechanism for the banksters, and MBS generation and price support through the GSEs is a primary vector of the Bailout. So conscripted public support for the bubble (and for the zombie banks’ balance sheets) will continue via the GSEs. Geithner simply reaffirmed this. (Meanwhile, the posturing of Republicans and other alleged fiscal responsiblists is just posturing; they’re all lying when they imply they want to let housing markets discover reality-based prices. To say “let the private sector take it over”, while implying that asset prices could still be sustained this way, is imbecility. There is no private market for housing, not at anything near these bubble prices.)

 

The NYT does what it can to help with the fraud. In the very first sentence it gives a particularly deceptive version of the two-extremes-truth-in-the-middle lie:

 

The Obama administration has been barraged with ideas for reworking the government’s role in housing finance, spanning the spectrum from guaranteeing all mortgage loans to eliminating all federal subsidies for homeownership.
Treasury Secretary Timothy F. Geithner, speaking Tuesday at a conference to discuss the possibilities, made clear that the administration was not pondering such radical kinds of surgery as it develops a proposal it hopes to unveil in January.

 

Of course, “guaranteeing all mortgage loans”, what the piece calls a “radical” extreme, is in fact exactly what we have and what the NYT wants to help perpetuate. (All loans are either explicitly guaranteed or receive the implicit Too Big To Fail guarantee.) So now they’re reaching the realm of de jure lies of fact itself, and not just of truth.