More than half a decade after the collapse, and with talking heads proclaiming the recovery as strong as ever and the Fed remarking on the housing market's foundational pillar to that recovery, BlackRock's CEO Larry Fink [9]has a few words of warning for the exuberant - the US housing market is "structurally more unsound" today that before the last financial crisis. As the data comes in weaker and weaker, despite hopes for a post-weather bounce, the fact that the US housing market is "more dependent on Fannie and Freddie than we were before the crisis," is a problem for the US taxpayer and - unlike Mel Watt [10]'s 'free credit for everyone' approach to expanding the GSE's role [11], Fink says with strong underwriting standards, ownership of affordable homes can again become a foundation for American families. So Watt's easy 'Subprime 2.0' [11] or Fink's hard 'American Dream'.
BlackRock's Chief Executive Officer Laurence D. Fink said the U.S. housing market is “structurally more unsound” today than before the financial crisis because it depends more on government-backed mortgage companies such as Fannie Mae and Freddie Mac.
“We’re more dependent on Fannie and Freddie than we were before the crisis,” Fink said today at a conference held by the Investment Company Institute in Washington, noting that he was one of the first Freddie Mac bond traders on Wall Street.
Fink co-founded BlackRock in 1988 after a career at First Boston Corp., now part of Credit Suisse AG, where he was known for his work slicing and pooling mortgages and selling them as bonds. Fink, who has built New York-based BlackRock into a $4.4 trillion money manager, said today that with strong underwriting standards, ownership of affordable homes can again become a foundation for American families.
But how is this possible? Eveyone say the banks are in great shape? That housing is recovering? That everything is on its way back to normal? As Fink highlights... it is not and we are well on our way to Subprime 2.0 if the administration gets their way. [11]