Crapo: Fixing Mortgages
Magic Valley - October 5, 2014 - October 6, 2014
Magic Valley, By Senator Mike Crapo
Advancing housing finance reform provides an opportunity to institute sound reforms that will better protect the American taxpayer.
As we all remember, the 2008 financial crisis began with the bursting of the U.S. housing bubble. A central reason for this bubble and the subsequent burst was the role of Fannie Mae and Freddie Mac. During the height of the housing bubble, Fannie and Freddie began operating as undercapitalized insurance companies, holding just 45 cents in capital for every $100 in mortgages they guaranteed. When housing prices collapsed in 2008, it quickly became apparent that the thinly-capitalized enterprises would not be able to withstand their massive losses. Fannie and Freddie were placed into conservatorship, a status which then-Housing and Urban Development Secretary Hank Paulson described as a “time out,” and cost taxpayers nearly $200 billion.
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