Report from the bloggers' call with Sen, Johnny Isakson on privatizing Fannie and Freddie

Isakson

Four years after the housing crash showed us that this sector of our economy was made of straw--well, it still is. One of the villains of this disaster was government-chartered Fannie Mae and Freddie Mac, which are now under federal conservatorship.

In President Bush's Decision Points, he said that one of his justifications for bailing Fannie and Freddie out is that some foreign investors assumed that the pair were insured by the feds.

Stupidity should not be a protected behavior.

For now we are stuck with them. But Johnny Isakson (R-GA), who held a bloggers' conference call this afternoon, wants to divest ourselves of Fannie and Freddie by first transitioning them into a new entity that would have a 10-year life, called the Mortgage Finance Agency. Board members of this panel would be appointed by the president--and yes, the Senate would have to confirm them.

How is that bailout going? Our losses "approach $171 billion and climbing."

A natural criticism of the Georgian's bill, which is formally called the Mortgage Finance Act of 2011, is that the federal government won't be immediately out of the mortgage business when the bill is put into law. But things aren't that simple, Isakson warns, because Fannie and Freddie are dealing with 30-year mortgages.

"It's a bridge from where we are to where we want to be," Isakson summarized.

Foreclosed Fannie Mae home,
Morton Grove, IL

His bill will set up tough lending standards and establish a sinking fund to retired the debt.

A few hours earlier, President Obama offered his plan, not his first, to assist underwater homeowners. Curiously, Fannie and Freddie were not mentioned by the president. While the bailout is a Bush-holdover--or is it hangover?--the firms have long been cozy with Democratic politicians. They were practicing crony capitalism before most people had heard of it.

I asked Isakson a question about Obama's speech. While he is awaiting the details of the president's proposal, he favors the refinancing of underwater loans for those Americans who are making payments and are current on their loans, which was the central point of Obama's address. But he was disappointed Fannie and Freddie were omitted. "I think the president continues to miss the mark," Isakson bemoaned, "because as everyone really knows that's the 800 pound gorilla in the living room that we've got to deal with."

There are other bills that also lay out a roadmap for privatizing Fannie Mae and Freddie Mac--and Isakson is willing to take the best of all of them to remove that gorilla from the living room.

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