It’s been almost five years since the federal government bailed out Fannie Mae and Freddie Mac, costing taxpayers $187.5 billion. With the housing market on the mend, President Obama says it's now time to wind down the two mortgage giants and for private investors to take on a bigger role. Obama made his remarks on Tuesday in Arizona, a state that was hit very hard by the housing bubble in 2007 and 2008, leading to a wave of foreclosures. The approach Obama endorsed this week mirrors a bipartisan Senate bill that would minimize the government’s role in the U.S. mortgage finance market. “For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said. “It was heads we win, tails you lose. And it was wrong.”
But is private lending the best solution? Should Fannie and Freddie, which own or insure 2/3 of U.S. home loans, be shuttered or reformed? What should the fed’s role be in home buying?
Clea Benson, Housing Policy Reporter, Bloomberg News