Unlike most Germans, I am not a great fan of President Obama. But if he actually goes ahead with the announced plan to wind up Fannie Mae and Freddie Mac, it would be a feat of epic proportions that deserves nothing but respect.
For it needs to be remembered that the financial crisis, which began with the subprime crisis of the US housing market, was not caused by a “market out of control” or “unbridled capitalism.” Rather, it was caused by the interventionism of the US Government using the tool of its two semi-public banks with the cute names, which in truth are nothing but monsters. Conceived as a political measure to combat alleged “discrimination” of “minorities,” these two banks, on government orders, guaranteed mortgage loans for borrowers with a poor credit history. The utopian goal was to give every American a home or condominium of his or her own. It is common knowledge that the egalitarian project failed dramatically.
Contrary to the picture that Europeans tend to draw of the United States, the US market is a far cry from “unbridled capitalism.” Real estate financing, which in Germany is handled by private banks, has long been defined by government intervention, the principal transmission belt of government policy being the semi-public banks Fannie Mae and Freddi Mac.
If the United States managed to rid itself of these monsters, it would be a big step forward for the country. It remains to be seen, though, whether Obama’s words will be followed by action. You cannot always say as much of Obama, who is known as a man of big words and small feats. The details of the endeavour have not been set out yet, and what makes me sceptical is the fact that the plans to roll back government influence on real estate financing coincides with the announcement to offer government guarantees for private mortgage insurance companies.