Our recommendations for dealing with the housing GSEs are as follows:
1. Freddie Mac should be closed. Having a second housing GSE was supposed to provide competition and serve as a check on the first housing GSE, Fannie Mae. Clearly, this did not work. No need to continue, so:
2. Merge Freddie and Fannie. Instead of two failing agencies, we now have one. Allows for a concentration of focus, effort. Stabilize the resulting institution.
3. After one year, move Fannie back into HUD. Fannie Mae was separated from HUD in 1968. Time to reverse this. Moving Fannie into HUD extends the full faith and credit guarantee umbrella.
Time to revise the housing GSE experiment.
1. Freddie Mac should be closed. Having a second housing GSE was supposed to provide competition and serve as a check on the first housing GSE, Fannie Mae. Clearly, this did not work. No need to continue, so:
2. Merge Freddie and Fannie. Instead of two failing agencies, we now have one. Allows for a concentration of focus, effort. Stabilize the resulting institution.
3. After one year, move Fannie back into HUD. Fannie Mae was separated from HUD in 1968. Time to reverse this. Moving Fannie into HUD extends the full faith and credit guarantee umbrella.
Time to revise the housing GSE experiment.