Is there a future for Freddie and Fannie?

Freddie mac and Fannie may are the two mortgage institutions that sit at the heart of the US housing market. When the sub prime lending market collapsed, down they came with 5.4 trillion dollars of toxic debt.

Now, the US Government Accounting Office has issued a report http://www.gao.gov/products/GAO-11-33R opening the door to these being restructured and restarted as co-operatives.

Housing ought to work particularly well on a cooperative basis because people in homes have a long term interest and you can structure land, housing and finance in ways that keep costs down. In Germany, a regulated, largely cooperative mortgage sector has escaped the Anglo Saxon model which gave us speculation and short term choice – hundreds of mortgage products all premised on the fact that rising house prices meant more than the ability to repay.

At present building societies are being squeezed because the regulators want to treat them as if they were wannabe toxic banks rather than doing what would make more sense and demanding that banks behaved like building societies…

Good luck, Freddie and Fannie

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