Posted on 10/02/2013 11:01:44 AM PDT by whitedog57
Georgetown law professor, Adam Levitan, testified in the US Senate yesterday on Fundamentals of a Functioning Private Label Mortgage Backed Securities Market. 172476171-Levitin-Senate-Banking-Testimony-10-1-13
Levitan was a student of Consumer Financial Protection Bureau architect and former Harvard law school professor Elizabeth Warren (now a US Senator). Levitan is a believer in BIG government and everything is the private sectors fault.
Relying on PLS (Private Label Securities) to serve as the main financing source for the housing market would be a high-risk gamble with the US economy. Instead, a hybrid public-private system with first-loss private capital backstopped by an explicit and priced government guarantee, such as that proposed by S.1217,41 should provide the basic template for housing finance reform.
In other words, let lenders make risky loans and then stick taxpayers with the losses. Even with Corker-Warners hybrid public-private system, there will always be the perverse incentive to lower down payment and credit standards for short-term profits and politics. There is already talk that Corker-Warners skin in the game of 10% is too high and should be lowered to 5%. And so it begins.
Levitan (or Leviathan) failed to learn about the dangers of public-private hybrids from the Fannie Mae and Freddie Mac meltdown. He always blames the private label and PLS for the crash and ignores Congress pushing affordable housing goals on Fannie Mae and Freddie Mac.
According to John Weicher at the Hudson Institute, the affordable housing goals for Fannie Mae and Freddie Mac reached 56% for low and moderate income purchases, 27% special affordable goals purchases and 39% underserved area purchases. Notice the dramatic increase over time??
affordgoals
So Levitan wants us to suspend disbelief and pretend that affordable housing goals had nothing to do with Fannie and Freddies collapse. Government cronies will continue to be bailed out by taxpayers.
Corker-Warner is unstable because they can promise controls now, but those controls can be shut off later.
Lest we foprget, Levitans co-author is Susan Wachter, the former undersecretary of HUD under Andrew Cuomo when they unleashed the National Homeownership Strategy for loosening underwriting standards and increasing lending in underserved areas. nhsdream2
And here is Andrew Cuomo explaining, in 1998, that HUD was willing to gamble and risk higher default rates by lending to people who couldnt repay their loans.
Remember Barney Frank, the Godfather of loosening credit standards? It will happen again with any public-private hybrid, including Corker-Warner. Count on it.
moobs
So as we blunder openly into ANOTHER public-private housing finance model, we can only hope that government cronies dont try to lower underwriting standards again and stick it to the taxpayer.
Leviathan
the_leviathan__revisited_by_forgottenpurpose-d27tcn0
The professor ought to go back to his office - or dorm room - and study up on Fannie Mae and Freddie Mac.
Stupid.
I am going to send my dogs to Congress. They are a hell of lot smarter than the yahoos there.
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