The collapse of Fannie Mae and Freddie Mac into federal conservatorship was never a question of ‘if’ – it was always a matter of ‘when.’ Well, ‘when’ came a lot sooner than many expected.
Now there is a new matter of ‘when’ that is coupled with a question of ‘what’: When will the troubled government-sponsored enterprises (GSEs) get out of federal conservatorship, and what will become of them at that time? No one quite knows if there will be a return to the status quo, or if Fannie and Freddie will be chopped and sold, or if a previously undeclared solution will come about. This is exactly what we don't need now: a guessing game!
Clearly, the fate of Fannie and Freddie will not be decided before the Bush administration leaves office in January, so the onus will be on the next administration to sort out the mess. If the presidential candidates have clear-cut solutions, they are doing a great job in keeping them secret.
The most recent statements from the two presidential campaigns were painfully vague. Sarah Palin, the Republican vice-presidential candidate, spoke about making Fannie and Freddie ‘smaller and smarter and more effective.’ Democratic presidential nominee Barack Obama reiterated the obvious: that the GSEs were ‘so big and so tied into the housing market’ that steps were needed to ensure ‘they don't just collapse.’
Those statements are wonderful as sound bites but inadequate as solutions. No one is quite clear what either campaign will do with Fannie and Freddie; I wonder if they even know! Between now and Election Day, the presidential campaigns must come up with a detailed strategy on the futures of Fannie and Freddie. The Congressional Budget Office estimates a bailout will cost taxpayers $25 billion, which is the very last thing the country needs at this time. At the very least, we need answers today from tomorrow's leaders.
Fannie and Freddie will continue to operate in a business-as-usual mode for the foreseeable future, which may be the only possible ray of sunshine for the secondary marketing officers who rely on the GSEs. But as the debate over Fannie and Freddie evolves, I sincerely hope that the mortgage banking industry takes a proactive role in offering input on what needs to be done. Ratcheting up the lobbying and public relations push would be in the industry's best interests.
In the coming months, I would like to see more op-ed columns, news interviews, Congressional visits and position papers from the industry's leaders addressing this matter. The industry can ill afford to be an observer to this situation.
This is an extraordinary moment in time, and it incumbent upon the industry's leaders to be front and center in shaping its future in regard to the GSEs. Let's not look at these happenings and wonder if the glass is half-full or half-empty – let's look at it and determine that it's time for a new glass.
– Phil Hall, editor, Secondary Marketing Executive.
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
