Dodd Frank preferences Fannie and Freddie

The primary purpose of new regulation is not to eliminate 'abuses' but to increase  the power of state actors and their private allies at the expense of the more diffuse and less powerful general interest.  Exhibit number 1:  The Dodd Frank financial regulation bill.  The administration has issued new regulations that preference Fannie, Freddie and FHA - The very entities that were at the center of the housing bubble and collapse.  Why?  They're part of the power coalition.  To the rent seekers of Washington good policy means policy where they get the goods.  John Berlau explains:


Yet Fannie and Freddie are bigger than ever, securitizing nine out of ten home mortgages and receiving unlimited guarantees from the taxpayer, thanks to the Obama administration’s Christmas Eve bailout of 2009. And one provision of Dodd-Frank has not only slowed the momentum of reforming the GSEs, but threatens to make them even bigger.


Dodd-Frank’s rules on “qualified residential mortgages” — as currently proposed in a joint regulation by banking agencies, the Department of Housing and Urban Development, and the Securities and Exchange Commission — aggrandize the GSEs by putting shackles on their private-sector competitors. The regulation sets overly strict rules for downpayments for mortgages to be securitized, but then exempts from these requirements any home loan insured by the Federal Housing Administration or purchased by Fannie or Freddie.


It is impossible to stop this rent seeking behavior in Washington.  The Federal Government is too big, too powerful and too far away to control any more.  The multi-trillion dollar interests sitting in the beltway overwhelm common sense in the desperate scrabble for fabulous wealth.  The only thing that will save us is to break it up and return to a policy of competition for good governance among the states.

The alternative is another more massive collapse.  Like the one that Dodd Frank is building while it loudly claims to be saving us.  If we allow these rent seekers to do it to us again, then we deserve the disaster that is sure to befall us.

But our kids don't.