Non-profit ProPublica and National Public Radio allege that Freddie Mac, which was set up to make home loans more accessible, was in fact betting against homeowners.
It’s a highly disturbing, and completely shocking report. ProPublica’s Jessie Eisinger and Chris Arnold of NPR claim that the government-owned mortgage company was investing in securities that paid substantially more if people continued to pay off high-interest mortgages.
At the same time, they were tightening the grip on credit, making it difficult for homeowners to refinance and get out of such mortgages.
So what was good for Freddie Mac’s bottom line was diametrically opposed to what was right for some people who had mortgages with them.
It’s a scheme so devious The Joker wishes he thought of it first.
Now Freddie Mac officials claim there was a Chinese wall set up between the staffers responsible for their investments and those who dealt with credit regulations.
They deny there was any intent to manipulate credit regulations to enhance their pockets, and the investigation offered no evidence that there was.
Yet they’ve already agreed to stop making these risky investments, known as inverse floaters, after the Federal Housing Finance Agency leaned on them once the investigation became public.
Even if you buy Freddie Mac’s explanation, it doesn’t soften the blow. The conflict of interest here is unequivocal. The company is now essentially, owned by the taxpayers, and has a direct impact on who and who can not get a home loan.
So even if this just a case of the left hand not knowing what the right was doing, it’s inexcusable. The possibility that the company could have profited off homeowners misfortune, intentional or not, can not be left alone.
The banks have long been resistant to refinancing. Why? Well they never wanted to refinance, never had to refinance, and let’s face it, they’re just greedy bastards. Now Freddie Mac looks no better than their corporate brethren.
At a time when President Obama is finally talking tough about holding lenders accountable, there must be sanctions for the government- run company run amuk.
If the American public is going to take Obama seriously, he must bring the hammer down just as firmly on his own house as he intends to do on private banks.