Ederik Schneider Online

Saturday, November 19, 2011

Housing Alert: FHA Running Out of Money: How to save the Federal Housing Administration



The Federal Government has a history of setting up enterprises that are somewhat Self Financed and independent. But really aren't because the Federal Government still has a role in its management. The Post Service, the Federal Housing Administration, Amtrak, Social Security and Medicare aren't bankrupt yet. But both are in need of reform to avoid that same thing with Medicaid down the road. And the 2010 Affordable Care Act that I by in large support makes Medicaid financial outlook even worse. Because it adds millions of people to Medicaid without a way to pay for it and Medicaid is Health Insurance for Low Income people. Who can't afford to pay for their Health Insurance, so the revenue is going to have to come from somewhere else. FHA, Freddie Mac and Fannie Mae are what's known as Government Sponsored Enterprises or GSE, which is the big part of the problem right there. Government shouldn't be in the business of sponsoring enterprises, especially in a Capitalist Economy like America. Government is not a For Profit Organization but a Public Service designed to serve not to make money and collects revenue to do those things. Not to make money, doesn't mean it should run debt and deficits either but they are not in the business to make money. But to serve the people that they represent. The one example of where a GSE works pretty well would be the Federal Deposit Insurance Corporation or FDIC. Thats responsible for insuring all loans in America but they are independent of the Federal Government and Self Financed.

What we should be doing with Fannie and Freddie is first taking their Monopoly Status away from them. They are both the definition of "Too Big To Fail", their combine Net Worth is around 5T$. Thats 1/3 of the American Economy, They should be both broken up into 100-200 different company's, keep their Non Profit status. Make them completely independent of the Federal Government and see how they do on their own. Competing with other Non Profit company's in their field with no Special Advantages under law. And turn the FHA over to the States, for them to set up their own State Public Housing Insurance and Loan Agency. Thats Semi Profit, Non Profit, Self Financed and Independent of the Federal Government. Then in the future the Federal Government meaning Tax Payers wouldn't have to worry about having to bail these agency's out. For one they would no longer be tied to them and the other reason, they would no longer be part of the Federal Government. With the Red Tape and the Administration and Congress trying to Micro Manage them. Because they would have their own Management and Board of Directors and run like a business.

Government is not an enterprise but a Public Service and should be run like that, especially in a Capitalist Society and Liberal Democracy like America. They shouldn't be trying to run or Micro Manage business's but regulate those business's instead. Something up until the last ten years they were very effective at. And leave Business Management up to the people who know how to do that. Which is Business People in our Free Enterprise System.