Posted By thestatedtruth.com on August 17, 2010

Big changes coming to the housing market.  One thing you can be assured of, this will end badly, it always does when the government gets heavily involved.  “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,”  “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.” Gross said today at a U.S. Treasury Department conference…..

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis.

“To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.” The position taken by Gross, whose firm is among the biggest holders of U.S.-backed mortgage debt, is at odds with industry and government officials who have urged a smaller federal role.

Geithner said the government must reduce its role in housing markets and ensure Fannie Mae and Freddie Mac, the mortgage-finance companies operating under U.S. conservatorship, won’t require future bailouts.

“We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support,” Geithner said today at the conference.  There’s “no clear consensus” on how to design a new system, he said.

“The government’s footprint in the housing market needs to be smaller than it is today,” Donovan said at the conference, adding that Fannie Mae, Freddie Mac and the Federal Housing Administration guarantee more than 90 percent of all mortgage loans.  Fannie Mae, based in Washington, and Freddie Mac of McLean, Virginia, have been sustained by almost $150 billion in Treasury aid since September 2008.

“We need to begin the process of weaning the markets away from government programs and make room for the private sector to get back into the business of providing mortgages,” Geithner said. “We need to continue working to keep overall mortgage rates reasonably priced.”

Geithner said the administration “will not support” a system that relies on taxpayer funds to backstop the gains of private shareholders.  “Fixing this system is one of the most consequential and complicated economic policy problems we face as a country,” he said. “This is a test for Washington. The stakes are high. The housing industry supports millions of jobs. For many Americans, their home is their largest financial asset.”

U.S. home ownership rate fell to 66.9 percent in the second quarter, the lowest level since 1999 and down from a peak of 69.2 percent in 2004, according to Commerce Department figures.

For full article….http://www.bloomberg.com/news/2010-08-17/geithner-says-fannie-mae-freddie-mac-need-overhaul-to-reduce-u-s-role.html

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