Privatizing Fannie and Freddie: Be Careful What You Ask For

Brief

Privatizing Fannie and Freddie: Be Careful What You Ask For

Abstract

The debate over whether to recapitalize and release the GSEs into the private market is often framed as a choice of whether or not to return to a prior period in lending. For all its shortcomings, the argument goes, at least we know what to expect in the cost and availability of mortgage credit. The authors explain why this is a misconception. In releasing the GSEs into the private market again, we would release them into a very different regulatory and economic environment, and they would respond, not surprisingly, by charging very different mortgage rates.

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