WASHINGTON, D.C. – To fund Obamacare, the Obama administration planned to end the American Dream of middle-class home ownership by stealing from Fannie Mae and Freddy Mac the profits needed to pay dividends to private investors and to recapitalize the two Government Sponsored Entities (GSEs) needed to withstand future economic downtowns.
The latest document released today – the third of three released this week – is a Treasury Department document intended for internal government use, titled “Housing Finance Principals,” dated Jan. 24, 2010, with a subtitle “Discussion Document: Sensitive and Pre-Decisional” marked “Sensitive Material/Do Not Distribute.”
Below: The Third Document
To replace Fannie and Freddie, the Obama administration planned to turn over the financing of middle-class home mortgages over to Wall Street and big banks in a plan the Treasury Department knew would likely end the 30-year fixed mortgage and severely restrict the capital required to promote a robust middle-class home-buying market.
Not only were the profits confiscated by the Obama Treasury Dept. from Fannie and Freddie diverted to pay the Obamacare insurance subsidies that Congress had refused to provide taxpayer dollars to fund, but the department also planned that after the demise of Fannie and Freddie, the only government subsidy provided to home buyers would be Federal Housing Authority subsidies for low-income home buyers.
I feel sure that my friend @RandPaul will come along with the new and great health care program because he knows Obamacare is a disaster!
— Donald J. Trump (@realDonaldTrump) March 8, 2017
In an “Overview” on page 2, the Treasury document makes clear that a policy decision on Fannie and Freddie’s ultimate destiny was planned for release by the Obama administration during the week of Feb. 7, 2011, to be made public though an inter-agency rollout plan that involved congressional and press briefings.
The “Overview” notes that the decision meeting was scheduled to be held with President Obama on Jan. 28, 2011, in anticipation of the public announcement in early February that year.
The guts of the Treasury Dept. internal discussion document are laid out in page 3, “White Paper: Revised Executive Summary Structure,” marked again “Sensitive/Pre-Decisional.”
The bullet points on page 3 articulate the department objective to privatize the federal mortgage operations traditionally undertaken by Fannie Mae and Freddie Mac with a methodology that would “Scale back the government’s role in the housing finance system to reduce taxpayer risk and bring private capital into the market.”
On page 3 (in what is referred to as “Slide 5”), the document makes clear the Treasury Dept.’s “housing reform” plan has no role envisioned for Fannie or Freddie, only for the Federal Housing Authority, FHA (traditionally a provider of low-income housing subsidies): the U.S. Department of Agriculture, USDA (a key provider of rural home loans); the Veterans Administration (VA); and Ginnie Mae, another government home financing agency that specializes in providing insurance for bonds issued by the FHA and VA in “affordable housing” programs target at low-income home buyers and veterans.
Page 4 further defines the Treasury Dept. “White Paper” with a focus on “Access/Affordability.”
The point of the “Access/Affordability” discussion appears to be the need for government to require Wall Street and big banks to continue to stress the needs of low-income home buyers as they take over the mortgage securitization activities traditionally performed by Fannie and Freddie, with their traditional emphasis on credit-worthy middle-class home buyers.
That is specified in a bullet point “Duty to Serve” that reads as follows: “A requirement of secondary market participants to serve undeserved markets, ensuring that securitizers and guarantors of mortgages provide equal consideration and support to credit-worthy borrowers in all communities.”
The conclusions of the Treasury Dept. discussion document are presented on page 5, entitled “White Paper: End State Options.”
The first point, “Limited government role to FHA, VA, USDA, and Ginnie Mae” reads:
“One option for further reform would be to continue winding down the government’s role in housing finance until it is phased out, except for the targeted support provided by FHA, VA, USDA, and Ginnie Mae. Under this approach, the allocation of capital to housing finance would generally be left to private markets, though still subject to strengthened regulation and access and affordability initiatives as described above. This would remove the additional taxpayer risk from supporting the housing finance system, and eliminate the moral housing and other market distortions that can arise from a broad-based government guarantee of assets.”
The first point continues with more explicit language of the Treasury Department’s intent, reading as follows:
“Such a path would not be without cost, however, as it [could/would likely] mean higher mortgage rates, less availability of the pre-payable 30-year fixed-rate mortgage, and less standardization of products throughout the housing-finance system.”
For those familiar with the securitization process as implemented by Wall Street and big banks, by which mortgage loans are packaged into securities that can be sold to either interest rate investors and/or investors interested in principal re-payment, this document advocates that middle-class families should be pushed into rental units (much as in Europe), as home-ownership fades as part of the American Dream alongside the rise of Obamacare.
The remainder of Page 5 makes clear the Treasury Department plan would keep government mortgage re-insurance only for the low-income housing programs offered by the FHA, the VA, the USDA, and Ginnie Mae.
On Feb. 2, 2012, the Washington Post reported on the Treasury Department’s plans for “reforming the U.S. housing market,” suggesting the Obama administration took one year to make final decisions on the proposals put forth in the Treasury Dept’s “Housing Finance Principals” discussion document dated Jan. 24, 2011.
“The Obama administration plans to push forward this spring with efforts to wind down government-backed housing giants Fannie Mae and Freddie Mac and attract more private funding to mortgage markets, Treasury Secretary Timothy F. Geithner said Thursday,” the Washington Post stated.
“Geithner told reporters that administration officials have begun more intensively exploring legislative options for overhauling the nation’s finance system with lawmakers on Capitol Hill, as well as with academics and outside advocacy groups,” the Washington Post article continued. “Still, he said that concrete changes won’t come soon.”
The Washington Post noted that “in a white paper last February,” the Obama administration had outlined options for “a long-term overhaul of the housing markets,” with options that eliminated Fannie and Freddie while retaining the FHA “which focuses on loans to borrowers who can’t afford sizeable down payments.”
Throughout the second term, the Obama administration continued to rob Fannie and Freddie of all profits to divert them to pay Obamacare insurance subsidies, defying the will of Congress.
Fortunately, Obama’s second term ended without the administration proposing any legislation to reform mortgage finance in the United State, even with all the planning undertaken by the Treasury Department in the years 2010-2012.
But Obamacare remains in place.
Part 1 of the First Document
The First Document
The Second Document