(Washington, D.C.) – Today, Citizens Against Government Waste (CAGW) named Federal Housing Administration (FHA) Commissioner Carol Galante its April 2013 Porker of the Month for her agency’s apparent desire to rekindle the financial crisis of 2008 by developing new ways to interfere with mortgage markets. Undeterred by the lessons of the housing collapse and the spectacular failures of Fannie Mae and Freddie Mac, Commissioner Galante made clear on April 2 in The Washington Post her view that the federal government knows which borrowers should or should not be approved for a mortgage: “There are lots of creditworthy borrowers that are below 720 or 700 – all the way down the credit-score spectrum,” said Galante, adding, “It’s important you look at the totality of that borrower’s ability to pay.”
In a staggering display of short-term memory loss, housing officials within the Obama administration like Commissioner Galante are bending over backwards to push banks to make bad loans again. Specifically, Commissioner Galante’s FHA has, according to the Post, been “urging the Justice Department to provide assurance to banks … that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default,” while encouraging the same banks to utilize home loan programs that insure banks against losses. In the event of default, taxpayers would be on the hook.
The nation has been down this road before. The housing crisis that precipitated the latest recession was complicated, but it was undoubtedly made worse by the fact that the two federal housing giants with a federal “implicit guarantee,” Fannie Mae and Freddie Mac, were sucking up bad loans originated by private lenders at an alarming rate. Thanks to that strategy, taxpayers have paid $187 billion to Fannie and Freddie since they were brought under conservatorship in September of 2008. Last year, the White House announced the creation of a mortgage-related arm of the Consumer Financial Protection Bureau dedicated to punishing lenders that gave money to people without the means to pay it back. Now, with banks behaving more cautiously, the Obama administration would like them to lend to borrowers with compromised credit.
“Commissioner Galante’s Goldilocks complex makes it awfully hard to discern just what banks are supposed to do,” said CAGW President Tom Schatz. “Five years ago they loaned too much, now they loan too little. First they would be punished for making risky loans, now they are being told to hand money out to everyone. Unless Commissioner Galante has been handed tablets from on high with lists of responsible borrowers – and, if the FHA’s $16.3 billion net worth deficit is any indication, she hasn’t – she should stop endangering taxpayers.”
For attempting to resurrect the types of bad lending that capsized the economy a few years ago, and for attempting to institutionalize the federal government’s micromanagement of housing well into the future, FHA Commissioner Carol Galante is CAGW’s April 2013 Porker of the Month. CAGW is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.
Visit Citizens Against Government Waste (CAGW) for more information