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This was sent to me before yesterday’s debate by my mom. She is General Counsel for Fannie Mae and because she is both my mother and an expert on this particular topic I feel I should share with you what she shared with me.

Plus, I have a pretty bad bacterial eye infection and can’t bear to write any content of my own right now. I will let her do the work for me.

As an attorney advising banks and mortgage lenders for the last 30 years, I know a fair amount about what has happened in the housing market. I have read many articles and heard John McCain repeatedly blame the GSE’s – (Fannie Mae and Freddie Mac) for today’s troubles. He is simply wrong. I am attaching a recent article written by the McGlatchy newspapers, the third largest newspaper in America, which publishes The Miami Herald, The Sacramento Bee, the Fort Worth Star-Telegram, The Kansas City Star, the Charlotte Observer, and The (Raleigh) News & Observer which I think has the analysis right. While John McCain has criticized Fannie and Freddie for years, it is not for the reasons he states. He simply fundamentally believes (like the Wall Street Journal) that government should not be involved in housing policy. He argues that the big banks and free market do just fine on their own. There is no need for these entities in America. The fact that housing prices for conforming loans (loans eligible to be sold to Fannie Mae ) were .25 basis points to .60 bps cheaper than non-conforming loans, helping average Americans purchase homes less expensively was not persuasive to him. He didn’t want government competing with the free market banks.

The problem with that philosophy is that when times are good, everyone rushes into the market. When times are bad, they stop lending. Even the Wall Street Journal (and Hank Paulson) recognize today that Fannie and Freddie serve a fundamental and critical purpose. They (and FHA) are the only entities buying mortgage loans in today’s market. McCain recently stated that Fannie and Freddie should be privatized – their government charter taken away. This makes no sense to me. Fannie and Freddie are now buying 80% of the mortgages made in America today, with FHA buying the rest. If the government charter was removed and the companies privatized, somebody tell me who would be lending AT ALL in this market? If you think you have trouble selling your homes today with credit tight, imagine what would happen if 80% of the funds that are buying mortgages today were removed? If 80% of the money for mortgage lending was eliminated, what do you think that would do to housing values? DOWN, DOWN, DOWN.

I don’t know if McCain will continue in the debate tonight to blame Fannie and Freddie for today’s economic problems. but I wanted you to be aware of how poorly thought out his solution is of privatizing these companies. I have already lost a very substantial sum in my 401K, brokerage account, housing value, etc. I don’t think I can afford another 4 years of Republican economic policies, particularly if he continues his plan to privatize Fannie Mae and Freddie Mac. But then again, he keeps changing his position on the economy. Maybe he’s changed his view on this as well…..Read the article attached and make up your own mind.

(View the article)