Say Goodbye to Fannie and Freddie

William Poole:

On Tuesday, the Obama administration plans to hold a conference to address the question of what to do with the two companies.
. . .
The danger in having any new mortgage agency is that its guarantees would subsidize mortgage risk, eventually leading to further taxpayer losses. The only sure way to prevent that outcome is to phase out Fannie and Freddie. If the home finance market were fully private, then it would bear the losses from its own mistakes in pricing and insurance. The proper government role is regulatory oversight and not direct operation of financial firms.

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