Wells Fargo CEO: Get gov’t out of “the home loan business”

posted at 2:41 pm on January 7, 2013 by Ed Morrissey

Policy-wise, this is an oldie but a goodie, I guess, even though we’re still spending tons of money on Freddie Mac and Fannie Mae more than four years after the crash. Wells Fargo CEO Robert Kovacevich can’t believe that we haven’t learned the lesson from 2008 and gotten the government out of the home mortgage industry, and tells CNBC’s Squawk Box that the two organizations made that crash exponentially worse than it needed to be:

Fannie Mae and Freddie Mac exacerbated the 2008 mortgage crisis, and that’s why the U.S. government should get out of the home loan business, former Wells Fargo CEO Richard Kovacevich told CNBC on Monday.

“If it wasn’t for Fannie and Freddie, [the mortgage crisis] would have been a small problem. Fannie and Freddie and other government agencies guaranteed 70 percent of those [bad] mortgages,” Kovacevich said in a “Squawk Box” interview. He argued that without government-sponsored guarantees, there would not have been any private money willing to buy the toxic loans that have been blamed for the crisis.

“There needs to be a decision that the government will not be in the mortgage business in the sense of a hybrid [like Fannie and Freddie],” Kovacevich said. He did say that if the government wants to be in the home loan business, it should do so through the Federal Housing Administration, which has worked well for a long time.

I’m not sure that’s any better, since the Obama administration uses FHA the same way Congress used Fannie and Freddie.  Erika wrote nearly two months ago that FHA might need a bailout itself, thanks to their adoption of the Fannie/Freddie model in order to push lending to riskier recipients.  I’ve been writing about that since 2009, and even if the bailout would cost significantly less, it’s yet another example of how government distortion in lending and securities markets are nothing but a set-up for disaster — a lesson we shouldn’t have to relearn after 2008.

Speaking of which, remember when the Obama administration and Democrats said that they couldn’t take up Fannie/Freddie divestment in Dodd-Frank because of the complexity involved, and said that taxpayer protection from these sinkholes would be tackled separately?  Whatever happened to that effort?

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He better watch out, there going to be new SEC probes if he keeps this up.

Tater Salad on January 7, 2013 at 2:46 PM

Wells Fargo CEO: Get gov’t out of “the home loan business”

This is my mortgage company.

I think I may have to support them next time I’m in the market for a home mortgage.

UltimateBob on January 7, 2013 at 2:49 PM

Get gov’t out of “the home loan business”

Yes Yes Yes. This WAS the recession 0f 2007.

MaiDee on January 7, 2013 at 2:51 PM

affordable housing!

tom daschle concerned on January 7, 2013 at 2:55 PM

If a liberal’s lips are moving s/he is probably lying. Any promise of future action by a liberal in return for some supposed goody now should always be met with the skepticism it deserves. Why Republicans keep falling for it over and over again escapes me, except that they are not aware of Einstein’s definition of insanity.

College Prof on January 7, 2013 at 2:56 PM

Also my mortgage company, although they assumed it after Wachovia. I may support them by opening an account with them – if they survive getting jackbooted by speaking truth to the power.

AH_C on January 7, 2013 at 2:58 PM

Color for Change boycott of Wells Fargo in 5…4….3…

He’s a rich 1%er.

PappyD61 on January 7, 2013 at 2:59 PM

Meh. Good luck with that. Once gubmmit gets its grubby fingers into an industry, its darn near impossible to get it out. Gubmmit enjoys the power it wields in dictating business practices, our lives, and “fair” redistribution of other peoples’ property and wealth.

hawkeye54 on January 7, 2013 at 3:00 PM

Nice bank you have there, shame if they had violated any federal laws…

right2bright on January 7, 2013 at 3:01 PM

…guess he didn’t go to an Ivy League school!

KOOLAID2 on January 7, 2013 at 3:01 PM

privatize fannie and freddie now!

nathor on January 7, 2013 at 3:02 PM

Unfortunately he’s the former CEO. The tack of the company now is slightly more progressive. Can’t say I blame them. If you’re a business, espceially a large bank, trying to turn a profit in Obama’s America and you’re not at then table, then you’re on the menu.

Kataklysmic on January 7, 2013 at 3:04 PM

I have my home mortgage through Wells Fargo. The irony is that when I refinanced on a 15-year loan early last year, they offered me a lower rate through a government-backed program. They were pretty aggressive pushing it too even though I told them I was not underwater on my previous mortgage and was theoretically not the intended recipient of the benefits of that program.

Doughboy on January 7, 2013 at 3:04 PM

↑ *especially

Kataklysmic on January 7, 2013 at 3:05 PM

Didn’t Wells Fargo give money to Barack Obama’s convention this past summer?

http://www.bloomberg.com/news/2012-09-04/companies-pay-20-million-to-fund-democratic-convention.html

Why yes – yes, they did.

Shut up, Dick. Or leave your money where mouth is. You can’t have it both ways.

beatcanvas on January 7, 2013 at 3:09 PM

Why yes – yes, they did.

Shut up, Dick. Or leave your money where mouth is. You can’t have it both ways.

Ah, but so many do want it both ways.

hawkeye54 on January 7, 2013 at 3:11 PM

“In September 2009 Wells Fargo announced Kovacevich will step down as chairman and a director at the end of 2009 and retire from the company in early 2010 after 23 years with the company.”

I saw Kataklysmic’s comment – quite right.

http://en.wikipedia.org/wiki/Richard_Kovacevich

No longer CEO or Chairman, which I thought he remained.

beatcanvas on January 7, 2013 at 3:12 PM

Wells Fargo CEO: Get gov’t out of “the home loan business”

…Whore’s shouldn’t talk!

KOOLAID2 on January 7, 2013 at 3:13 PM

Now onto student loans…

CW on January 7, 2013 at 3:14 PM

Little late now. Barney Fwank et al have managed to diddle what, 80%? 90%? of all mortgages?

rayra on January 7, 2013 at 3:18 PM

Wells Fargo CEO The next Ronald Reagan-like figure: Get gov’t out of “the home loan all business”

Why do I have a feeling there won’t ever be another like Ronald Reagan, at least in my lifetime?

[I think Palin's come the closest, but doubt that even she'd endorse laissez-faire capitalism. What a concept ...]

ShainS on January 7, 2013 at 3:21 PM

The government should get out of most businesses that is now doing except for Defense, National Security, and Foreign policy, i.e. the way the Founding Fathers intended it to be… The government should get out of the business of social security, medicare, medicaid, welfare, home loans (housing and urban developement HUD), energy, education (student loans), etc… or else it will for certain put the whole nation in total bankruptcy in less than 10 years…

mnjg on January 7, 2013 at 3:25 PM

Franks want to be senator now.

Franks/Dodd can go to Hades.

Schadenfreude on January 7, 2013 at 3:33 PM

Frank want to be senator now.

Of course he does. He does so love the access to power and wealth that CONgress and the Senate provide. He found out just how much he misses the party scene in DC too.

hawkeye54 on January 7, 2013 at 3:35 PM

…under the able direction of Mr. Franklin Raines, who as we all know made out like a bandit from that direction. The govt screws up everything it touches. Wells Fargo better watch out. They could be in for a boat load of audits.

Kissmygrits on January 7, 2013 at 3:55 PM

Why do I have a feeling there won’t ever be another like Ronald Reagan, at least in my lifetime?
ShainS on January 7, 2013 at 3:21 PM

There is no savior called Reagan. Greats never return and little men can’t be greats.

antisocial on January 7, 2013 at 4:06 PM

Speaking of which, remember when the Obama administration and Democrats said that they couldn’t take up Fannie/Freddie divestment in Dodd-Frank because of the complexity involved, and said that taxpayer protection from these sinkholes would be tackled separately? Whatever happened to that effort?

I’ll tell you. The Obama and the Dems weren’t serious and the Republicans didn’t bother to hold them to it. And when I say the Republicans didn’t hold them to it, I include in the meaning that the Republicans in the House, particularly, didn’t forward their own proposal to start the conversation, stimulate dialogue, keep the issue before the public, force the Dems to speak with honorable intentions or suffer the consequences, etc, etc, etc.

Republicans will not shake being the Party of Do Nothing combined with the Party of NO, if they’re always sitting around waiting for the Dems to propose things and be reactive to events of the Democrats’ making. One can’t win if you don’t score. You can’t score if you never play offense. You can’t go on offense if you never accept the opportunity to act.

“Do something!”, Republicans! It doesn’t have to be more, either in more regulation, more spending, or more taxes. It can be less, especially if that regulation, spending or taxes has been proven to be bad.

Dusty on January 7, 2013 at 4:10 PM

The govt screws up everything it touches.

That right there is a feature, not a bug! Self made screw ups so it can come to its own rescue.

hawkeye54 on January 7, 2013 at 4:12 PM

Fannie and Freddie should have never existed in the first place. At $16.5 trillion and counting, I think they have just about found the bottom of the deep pockets of the American taxpayers…..

supersport667 on January 7, 2013 at 4:18 PM

Strange, when a business makes mistakes and has to change what it does, often it can be very painful to employees, management, and stock holders.

When government makes mistakes (in particular making business do things the way government wants or else) it can be very painful to the employees, management, and stockholders.

Where is government? If there is no painful feedback from its mistakes then it can continue to do as it wants without regard for the effects on others. This is particularly true of politicians.

Russ808 on January 7, 2013 at 4:26 PM

Big Woop. Wells Fargo did alright in the bailouts.

kens on January 7, 2013 at 4:55 PM

You have his name as Robert at the top of the page but I’m pretty sure everyone calls him Dick. Either you’ve got his name wrong there or his nickname is more offensive than I had originally thought.

Vanilla on January 7, 2013 at 5:09 PM

The govt screws up everything it touches.

That right there is a feature, not a bug! Self made screw ups so it can come to its own rescue.

hawkeye54 on January 7, 2013 at 4:12 PM

The private sector is generally more incompetent than the public sector.

crr6 on June 12, 2010 at 12:08 PM

Del Dolemonte on January 7, 2013 at 5:35 PM