Reforming the Housing Market By Phasing Out Fannie Mae and Freddie Mac

Removing federal involvement in housing finance can jumpstart a long-term recovery

Taxpayers have already spent over $140 billion bailing out Fannie Mae and Freddie Mac and total losses could rise to $259 billion by 2013 according to a recent government estimate. To bring stability to the nation’s struggling housing market and take taxpayers off the hook for future financial losses, policymakers should begin reducing Fannie Mae and Freddie Mac’s involvement in the mortgage industry. A new Reason Foundation policy brief details how to reform mortgage industry by beginning to phase out Fannie and Freddie.

“Taxpayer dollars are going to Fannie Mae and Freddie Mac so they can artificially prop up housing prices,” says Anthony Randazzo, author of the Reason Foundation report. “It is going to be painful, but our leaders need to let housing prices find their natural bottom, without government interference, for a truly sustainable recovery to begin. Congress can bring stability to the economy by beginning a long-term strategy to dissolve Fannie and Freddie.”

Randazzo outlines seven keys to fixing the housing finance system:

  1. The role of government should be as regulator of the finance market, not a financer itself.
  2. There should be no risk to taxpayers.
  3. If Congress refuses to fully remove government, then the government’s role as financer should be as restricted as possible.
  4. The government should repeal all policies and regulations that distort the market, and overtly favor increasing homeownership.
  5. The government approach shouldn’t favor one segment of the housing market over another.
  6. Government should promote transparency.
  7. The government should make the consequences of criminal behavior clear, prosecute fraud, and incentivize consumer relations best practices.

Full Report Online

The full study, Rethinking Homeownership: A Framework for 21st Century Housing Finance Reform, is online here.

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website, Reason.com. For more information, please visit Reason.org.

Contact

Anthony Randazzo, Reason Foundation, (202) 556-0121




;