Today’s WSJ daggers the popular mythology that the we’d all be better off if we had never let Fannie/Freddie come to dominate the mortgage market, and that a safer real estate finance system involves going back to the days of yore when banks made the rules, held their own loans to maturity, and all was peaches:
“according…the Office of the Comptroller of the Currency, which regulates national banks… 19.7% of mortgages in banks’ portfolios were delinquent at the end of March. By contrast, nearly 6.8% of mortgages backed by Fannie and Freddie were nonperforming, as were 11.4% of all mortgages.
Which totally means we should re-invent the housing finance system and hand it over lock-stock-and-barrel to the national banks, right?
[Aside: This, by the way, is exactly what is likely to happen, because it is what the banking power structure wants - to assume the role of Fannie/Freddie in the post crisis real estate finance system. You read it here first.]
Don’t get me wrong, Fannie and Freddie are basket cases in their own right, and need serious fixing, but if you think the Wall-Street dominated, belt-and-suspenders crowd is going to lead us to perpetual safety, I have some Greek credit default swaps I’d like to speak with you about.