http://www.onenewsnow.com/Business/Default.aspx?id=834590A regulatory policy expert says the Obama administration is pursuing an odd strategy designed to prop up the housing market -- make even more bad mortgage loans.
Quietly on Christmas Eve the Obama administration lifted caps on how much federal bailout money mortgage giants Fannie Mae and Freddie Mac can receive from the U.S. Treasury.
The previous bailout limits for the two government-controlled firms were set at $200 billion each, but now there are no limits.
James Gattuso, a senior research fellow in regulatory policy at The Heritage Foundation, says the Obama administration either anticipates that Fannie and Freddie will report an especially poor financial performance for the fourth quarter that will require a massive new bailout, or the two firms will be asked to take on a much larger role.
"Bad scenario number two is the possibility than Fannie Mae and Freddie Mac are going to become providers of bailout money to the rest of the housing industry and to the mortgage industry - to essentially become extensions of the TARP program through purchases of bad loans to try and prop up the rest of the financial sector," Gattuso notes. "That is, in my view, the more likely scenario and in fact would be an extension of what these government-run organizations have been doing for the past year anyway."
The research fellow says that if the Obama administration believes more housing subsidies are needed, then that should be announced directly and debated on its merits, rather being done indirectly through firms that are under government conservatorship.
Topic: Treasury lifts bailout cap (Read 811 times)