Breaking The Street : Housing Experts Plan the End of Fannie, Freddie
A new paper authored by Mark Zandi, chief economist of Moody's Analytics, and former government officials from both sides of the political aisle calls for an end to government-sponsored enterprises Fannie Mae (FNMA_) and Freddie Mac (FMCC_), the bailed-out housing giants who now originate more than 80% of today's mortgages.
"Fannie Mae and Freddie Mac would not be part of the future housing finance system. Their investment portfolios would be wound down, their securitization activities spun out into the new platform, and their guarantee functions sold to privately funded MBS insurers. Any remaining assets would be sold. Taxpayers would be repaid (to the extent possible) for their past support of Fannie and Freddie," the authors wrote.
This largely reflects the thinking in Washington, where there is little political appetite to return the agencies back to private hands, even though both are now making record profits.
But the new system will not be completely devoid of the government's involvement. The paper instead calls for a system where private capital takes the first-loss position, while the government will step in in the event of a catastrophic failure of the mortgage market.
"In good times, when private capital is ample, private markets would provide a broad range of mortgage products with a limited government backstop. During times of severe economic stress, when private investors are unwilling to bear much risk, the government's market share would naturally expand," they wrote.
This is in fact what happened in the financial crisis. The difference is, the government's role in the future would be "explicit and transparent" so that taxpayers are compensated for their risk.
The authors consider a government backstop essential for a stable financial system that ensures borrowers get access to credit under all economic conditions. "...Though the previous housing system had serious flaws, government involvement meant that mortgage financing remained available
Mr. srBS - following Zandi is like being a lemming running over the cliff - when in the past 10 years has he been right? advisor to McCain - that should say it all - but zandi has been eating his brand of gravelly mud oatmeal every time he opens his mouth.
Please give me a break we started 5 years back and not a single official paper for debate came out so far and we have a grate banking committee to be lead yet confirmations of Watt will start on 6/27 I think will take a few years to decide what to do however the release might take effect by year end
Cramer says this everyday at 9:25 on CNBC, he just had one of his kids write an article, BFD. What is this based on Corker's ROUGH DRAFT on March 14, 2013? Come on no CONCRETE INFO again. Latch on to another TEAT.