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Freddie Mac bets billions against American homeowners. It’s shocking. What should we learn here?

Freddie Mac headquarters in McLean, Va., and the Fannie Mae headquarters in Washington. (AP)
Freddie Mac headquarters in McLean, Va., and the Fannie Mae headquarters in Washington. (AP)

The story was almost too bad to believe.  At the very time millions of Americans were desperately struggling to hang on to their homes, to keep their families’ heads above water, Freddie Mac – the taxpayer-owned mortgage giant – was betting against American homeowners refinancing.

Betting billions against lower monthly mortgage payments for families absolutely on the edge.  Freddie Mac would make a killing.  American dreams would get killed.  Now Washington’s talking relief.  But what happened here?

This hour, On Point:  the outrage over Freddie Mac.
-Tom Ashbrook

Guests

Chris Arnold, National Public Radio correspondent. He is the co-author of “Freddie Mac Bets Against American Homeowners,” a collaboration between NPR and the non-profit investigative journalism organization Pro Publica.

Jesse Eisinger, Pulitzer-prize winning senior reporter for Pro Publica, where he covers Wall Street and finance. He's the co-author of the NPR and Pro Publica piece this week: “Freddie Mac Bets Against American Homeowners.”

Christopher Mayer, professor of real estate at Columbia Business School.

William Black, professor at the University of Missouri - Kansas City School of Law.

From Tom's Reading List

ProPublica "Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates."

Forbes "Except, upon actually reading the story, I don’t get it. Freddie Mac did something potentially risky, but it was based on the reasonable assumption that interest rates can’t go much lower, but neither will they rise dramatically. "

Washington Post "President Barack Obama called on Congress Wednesday to make it easier for millions of additional homeowners to refinance their mortgages at lower interest rates even if they owe more than their homes are worth. He conceded that his administration’s housing plans so far have not lived up to their promise."

This program aired on February 2, 2012.

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