Bernanke Struggles to Find an Easy Way Out of Housing Mess

Flip flopping between what is financially wise for the nation and what is popular seems to be Fed Chairman Bernanke’s strong point, and one which has displayed prominently during the past few weeks.  Just take a look at this snippet from Bloomberg describing his plans:

Federal Reserve Chairman Ben S. Bernanke opposed a push to allow Fannie Mae and Freddie Mac to buy mortgages higher than $417,000, saying it may undermine efforts to strengthen regulation of the two largest U.S. mortgage finance companies.

A proposal in Congress to increase the limit “would be ill- advised if it has the practical effect of reducing the incentives to achieve meaningful” regulatory tightening over the companies, Bernanke said in a Sept. 17 letter to Representative Barney Frank of Massachusetts, Chairman of the House Financial Services Committee.

Frank and other Democrats, seeking to reverse the biggest housing market slump in 16 years, have called on the Bush administration to allow Fannie Mae and Freddie Mac to buy bigger mortgages and expand their $1.5 trillion investment portfolios. The companies’ regulator announced today it will allow the companies to annually increase their purchases of home loans and mortgage bonds by 2 percent.

Bernanke in the letter written two days ago said easing restrictions on the companies could prove to be “ill advised,”

While strongly opposing the us of Fannie Mae to bailout borrowers losing their homes, Bernanke fully supports bailouts for fellow bankers who issued illegal and corrupt loans.  Politicians always look out for their own, but the national backlash this may produce could destroy Bernanke’s hope of holding power for much longer.

While the government certainly should not be expected to pay off mortgage loans for consumers, it certainly seems more logical for the government to help families who stand to lose their homes than to help bankers who’re trying to foreclose on such homes.

October 8, 2007 | Filed Under Pay Off Mortgage 

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