August 12, 2007 (LPAC)--Fannie Mae, the largest single source of funds for home loans in the United States, was rejected by its regulator on Aug. 10, in its initial quest to be allowed to expand its loan portfolio by 10%. According to Daniel Mudd who heads Fannie Mae, quoted in the London Financial Times, raising the loan cap would allow Fannie Mae to "help alleviate the ongoing credit crunch in the markets and bring an additional measure of stability." Democrats such as Charles Schumer (D-NY) and Christopher Dodd (D-CT), chair of the Senate Banking Committee, have been clamoring in a misguided campaign for such a relaxation of the rules, hoping that Fannie Mae and its sibling Freddie Mac could help bail out the beleaguered home mortgage industry by injecting liquidity into the secondary mortgage market, allowing more homes to be refinanced.

But the Office of Federal Housing Enterprise Oversight (OFHEO) has refused the request. The head of OFHEO, James Lockhart, is toeing the Cheney-Bush Administration line that Fannie Mae and Freddie Mac at their present size are themselves a risk to the economy, and need to have tighter restrictions on their loan portfolios, not a freer hand. Lockhart, who as Social Security Commissioner openly campaigned for privatizing Social Security in 2005, is of the discredited White House group which claimed that private banks could organize the U.S. mortgage market as well or better than Fannie Mae, which could be abolished! Now Fannie and Freddie Mac are all that's left standing in the wreckage wrought by those private banks' wild securitization of residential mortgages. On Aug. 11, Senator Schumer demanded that the Bush Administration use Fannie Mae to bail out the mortgage industry, in the same way it was supposedly "stabilizing the liquidity crisis" of the banks by large-scale money-printing by the Federal Reserve and other central banks.

Both sides of this debate are missing the essential point of the wide-ranging systemic nature of the financial collapse already at hand, and which requires more than financial bandaids, such as the recent injections of liquidity by central banks throughout the world. It requires LaRouche's comprehensive revolutionary plan for economic recovery as outlined in his "Economic Recovery Act of 2006" and his more recent writings on the Bank for Infrastructure Development.