GSEs' share of monthly issuance of mortgage securities has doubled, to 84%, since 2006.
As government sponsored enterprises, or GSEs, they're often thought to have guarantees of federal support.
The GSEs aimed to make big profits, and big bonuses, while backed by the government.
The irony is that, in failure, the GSEs have become more important than ever.
FORBES: Three Essential Reads on The Housing Market Right Now
As a result, these Government Sponsored Entities (GSEs) got themselves into all kinds of trouble.
Virtually the only mortgages investors will buy are those guaranteed by the GSEs and other federal agencies.
Add to that list the mounting pressure on the FHFA and the fuzzy fate of the GSEs.
Under their guidance, the GSEs vastly expanded their operations and the foundations of the subprime debacle were laid.
FORBES: Obama Pushes Renting, Making It Easier To Whack Fannie And Freddie
As the GSEs ramped up their risk-taking, the Federal Reserve seemed, until it was too late, oddly unworried.
Government sought to solve this mortgage bottleneck with new relaxed lending standards and guarantees on the credits by GSEs.
When the housing bubble burst the GSEs were left holding billions of dollars in mortgages that ended up defaulting.
And the two GSEs are famous for campaign contributions to both parties.
Additionally, the Fed could shift some of their investments from treasuries to MBS, which would help to recapitalize the GSEs.
The group also says there should be limits on the GSEs' portfolio sizes and they should have strong capital requirements.
Chief among them is James Johnson, who, for most of the 1990s, ran Fannie Mae, the largest of the GSEs.
After pumping trillions into the mortgage market since 1998 through the GSEs, the homeownership rate is back to 1998 levels.
FORBES: Geithner: End Fannie And Freddie's Pricing Advantage
When banks like BofA make home loans they then turn around and sell them to GSEs, namely Fannie and Freddie.
GSEs argue that this is a false comparison, since the bulk of their portfolios is made up of guarantees, not loans.
Taking these gigantic government-sponsored enterprises (GSEs) out of the picture certainly would represent a momentous departure from past government housing policy.
FORBES: Obama Pushes Renting, Making It Easier To Whack Fannie And Freddie
The fundamental public-private conflict of the GSEs means the taxpayer will always be lender of last resort to these quasi-public organizations.
We did not take on the broad question of reform of the GSEs or the broader housing finance market in this bill.
To be fair, it should be said that the two GSEs had their Republican defenders too, including Newt Gingrich and Robert Zoellick.
FORBES: Book Review: Reckless Endangerment by Gretchen Morgenson and Joshua Rosner
Yet it dipped into the same pool of subprime and other nontraditional mortgages that the GSEs and Wall Street were fishing in.
Indeed, they plan to phase out the infamous government-sponsored enterprises (GSEs) and give the private sector a greater role in mortgage finance.
FORBES: Fannie and Freddie Feeling No Pain, That's For Taxpayers
Fannie Mae lied about its finances and policies and paid politicians who supported the GSEs and raided the cookie jar for itself.
Even after the Sarbanes-Oxley law, which forced public companies to adhere to a new oversight paradigm, the GSEs escaped with minimal scrutiny.
GSEs were responsible for 10% of existing home sales in the first quarter and continue to put pressure on already falling home prices.
"After reform, the GSEs will not exist in the same form as they did in the past, " Geithner said in his written testimony.
The same problem exists if the GSEs were reconfigured as for-profit companies but with tighter limits in areas like risk exposure and executive compensation.
BofA is dealing with the bulk of repurchase requests from the GSEs mostly because of how big its mortgage business became after purchasing Countrywide.
应用推荐