Freddie Mac Bets Against Homeowners

When the government owns or controls more of the economy, different parts of the government start working against each other.

Freddie Mac has an incentive to reduce its losses and its taxpayer bailouts.

The wider economy has an interest in the housing market rebounding.

These two goals are in conflict as the following report outlines.

AFP reports: WASHINGTON — US-owned mortgage giant Freddie Mac is holding billions of dollars in investments that only pay off if homeowners remain locked into high interest rates, a media investigation has found.
The report by the ProPublica website and National Public Radio on Monday said the mortgage giant began dramatically increasing such bets in 2010 at the same time it was making it more difficult for homeowners to refinance.
It said the trading arm of the firm is in theory “walled off” from its housing finance activities, which by government charter are to be directed at making home loans more accessible.
The Federal Housing Finance Agency (FHFA), which supervises Freddie, said in a statement to ProPublica that it had ordered a halt to such investments — known as “inverse floaters” — in December, following an internal assessment.
The assessment “had “identified concerns regarding the controls, including risk management,” it said in a statement published in full by ProPublica.
The statement said inverse floaters make up $5 billion out of a portfolio of $650 billion, and did not have any impact on its refinance program.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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