Edward DeMarco, acting director of the Federal Housing Finance Agency

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Niccolo Caldararo
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Yesterday  the Financial Times reported that Edward DeMarco, acting director of the Federal Housing Finance Agency which oversees Fannie Mae and Freddie Mac, is resisting banking lobbyists' efforts on Capital Hill and in the Obama administration to have nearly a trillion dollars in banking losses paid by taxpayers.  Elements in the Obama administration who have crafted a scheme to have banks reduce loan balances on homes in foreclosure or about to go into foreclosure, want these GSAs to take responsibility for mortgage reductions in order to preserve the major banks' investments in second mortgages and lines of credit that the homeowners had taken on.  In normal foreclosures and bankruptcy proceedings the banks seconds would be defaulted causing them to lose money.  The present plan requires the GSAs (thus the taxpayer) to take the loses.