Imagine you lent your car (in great mechanical shape) to a friend.  After a week, the car was returned, but the friend complained, "Listen, you need to fix this vehicle.  The tires have been completely worn away.  The brakes are toast, and engine is in need of serious overhaul due to over-revving." 

Just as you start to ask why the car is in such bad shape, the friend says, "It makes no sense to look at past history.  We simply need to repair it......NOW." 

You'd likely not let the friend operate the vehicle again - and you'd be wise to do so.

Fannie Mae and Freddie Mac were the government run entities that were used to "give" home ownership to Americans - a worthy endeavor.  But these economic engines were driven at top speeds (giving interest only loans, not checking credit ratings etc.) and ultimately caused the economic collapse of the housing market in so many sectors.  We taxpayers will foot the bill. 

George Bush warned against the instability that Fannie and Freddy's growth was causing, but was roundly criticized by the media and Democrats. 

President Obama is NOW going to reform Fannie and Freddie.  Of course, the Democrats have conveniently skipped over the fact that Fannie Mae and Freddie Mac, as the purchaser of more than 90% of all US mortgages, is a root cause of our current financial crisis.  They also want to gloss over the fact that Fannie and Freddie (as taxpayer subsidized entities) contributed heavily to Democratic candidates.  And let's not forget that Congressman Barney Frank was overseeing the agencies, while dating one of the top executives.  

The basic problem for Fannie and Freddie is that the concept did away with the major principal of banking - keeping a connection between borrower and lender.  When banks were creating mortgages to sell to Fannie and Freddie, the banks had no incentive to make sure the borrowers were "credit worth".  By not holding the loan, the issuing bank wasn't driven to make sure the home appraisal was legitimate.  After all, they could simply sell it to Fannie and Freddie, collect the fee and move onto the next prospective borrower.

So what's the solution?  I don't think this will take the standard 2,000 page legislation out of Congress.  In fact, I'd suggest a solution can be drafted in less than one full page.  Here it is:

   Obama should require that future Fannie Mae and Freddie Mac activity only purchase 90% of a mortgage.  The issuing bank MUST keep 10% of the loan.  Overnight, this change would reengage the lender in the lending process.  Banks would again care about credit worthiness and appraisal values.  It would prevent the fraud and abuse that has cost we taxpayers so dearly.  And it would restore integrity to the process and reform Freddie and Fannie.

    It's easy to implement and easy to understand.  Sadly, those are two aspects of the legislative process that our President and our Democratic leaders seem to abhor. 

    Just like the neighbors abuse of the car, it seems these "drivers" shouldn't be allowed back behind the wheel.