Out of Control Policy Blog

Reason Calls for GSE Privatization... in 2005

I was searching some of the Reason archieves this morning and came across this blog post from 2005: "Privatize Fannie and Freddie?" In the post my colleauge Len Gilroy cites an article from the now online-only Christian Science Monitor saying:

Fannie and Freddie together hold or guarantee about half of the nation's $8 trillion in residential mortgages. Should they lose the markets' trust and collapse, taxpayers could be forced to pick up the tab. Given their size, the fallout would make the Enron scandal and the savings-and-loan crisis of the 1980s look mighty small.

Both companies hold an unfair advantage over other lenders in the form of an implicit guarantee in a line of credit from the Treasury Department. That allows them to borrow at cheaper rates than their competitors. They're also exempt from state and local taxes.

Althought this view was only shared by some five years ago, everyone now understands the danger of the GSEs. It just took their predicted collapse to prove that. Now we must work hard to ensure the reform process doesn't create another monster.

Anthony Randazzo is Director of Economic Research


« Los Angeles Unified to Restrict… | Main | Housing and Land Use News… »




Out of Control Policy Archives