The Bush Administration and Congress proved that when there's enough at stake, bipartisan cooperation is possible, even in Washington, D.C. That's what happened when the administration sent to Congress a sweeping package of rescue measures that would allow the government to inject billions of federal dollars into beleaguered Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that touch nearly half this country's mortgages by either owning or guaranteeing them. The entire home building industry is breathing a collective sigh of relief that by the end of this week, we can all quit worrying that the implied federal government backing of these vital institutions might not be real.
Congress is being asked to extend the government's line of credit to the GSEs to as much as $300 billion. This is really a logical step. Each company now has a $2.25 billion credit line, which made sense 40 years ago, when Fannie had only $15 billion in outstanding debt. But it doesn't make much sense today, when Fannie has debt of $800 billion and Freddie has $740 billion. Today, the two companies also hold or guarantee loans valued at more than $5 trillion. Fannie and Freddie simply cannot be allowed to fail. Really, Wall Street and financial markets around the world have always known this. The rescue package Congress is likely to approve and send back to the President for signature into law by the end of the week simply makes it crystal clear.
The Federal Reserve is also opening its discount window to the two companies "to promote the availability of home mortgage credit during a period of stress in financial markets."
Giving the Fed a role in oversight of the companies is seen as yet another way to mollify nervous financial markets. But access to short-term borrowing through the Fed's discount window is likely to be a temporary measure that will end once the Congressional rescue bill reaches the President's desk. When that happens, we can go back to worrying about all the other crises this housing crash has heaped upon us.More on TQM and the Housing Slump
Back in the early 1990s, F. Gary Lewis was director of quality programs for the NAHB Research Center, and he and I worked together to develop the National Housing Quality award co-sponsored by the Research Center and Professional Builder magazine. He certainly qualifies as a keen observer of the TQM movement in the housing industry, even though he has long since moved on to a position as marketing director for Tilson Home Corp. in Texas. So it was interesting indeed that he sent me an e-mail response to my blog about Fletcher Groves' ruminations on the possibility that this housing slump could kill the quality process control movement in the housing industry.
Gary says it's a bit early to herald a death knell for TQM, although he acknowledges it's hard to keep your eye on small improvements in business processes when survival of the company hangs in the balance every day.
Still, Gary thinks this may change when competition, rather than survival, is once again the issue of the day. "Every builder's ability to understand, replicate and constantly improve the way they sell and build houses will move much higher on their 'hierarchy of needs,'" he reasons.
I hope he's right, but do you notice that his title is not "quality control director" — Gary's into marketing homes these days, as we all should be. Selling houses is priority one!
Read more from Bill Lurz on his blog, Ear to the Ground.