Smart Borrower Blog

Freddie CEO Defends His Company’s Existence


Jan 27th, 2010 @ 9:11 PM by Amber Nelson


After Congressman Barney Frank suggested recently that government-sponsored entities Freddie Mac and Fannie Mae should be “abolished,” Freddie’s CEO took a stand listing off the reasons his company needs to remain in business.

During a speech at the Detroit Economic Club on Tuesday, Freddie’s chief executive Charles “Ed” Haldeman Jr. said he would like to remind policymakers that Freddie and Fannie have helped to make the 30-year fixed rate mortgage possible. He also said that they have provided the most liquidity to the mortgage market, as they were the source of roughly 75 percent of all liquidity in 2009.

Haldeman added that Freddie and Fannie are the “backstop bid.” He said,” that means our customers know there will always be a buyer for their loans, which gives them the confidence they need to keep lending in any environment and keeps prices more stable.” Additionally, they are an “important counter-cyclical influence that stays in the housing finance market even when purely private capital has pulled out.”

Another point he made was that the two companies are able to adapt to innovations in the mortgage market better than a government agency would be able to.

Freddie and Fannie have been operating under government conservatorship for the past year, being taken over by the government when both almost fell into bankruptcy. They are generally considered entities “too big to fail” because they do support such a large portion of the mortgage market and aside from Representative Frank’s comments, there is little to suggest Freddie or Fannie will be ever shut down.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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