So, You Want to Go Back to Having Banks Hold All Mortgages?

by Alex Stenback on June 30, 2011

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.

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