Marron & Swagel Release Proposal for GSE Reform:
Whither Fannie and Freddie? A Proposal for Reforming the Housing GSEs
NEW YORK, NY: Today, Economics 21 contributors, Donald Marron and Phillip Swagel, released their paper on GSE reform titled: Whither Fannie and Freddie? A Proposal for Reforming the Housing GSEs. The paper can be read at the Economics 21 website: http://www.economics21.org/commentary/whither-fannie-and-freddie-proposal-reforming-housing-gses
Swagel and Marron put together a proposal with the mindset that few issues are as important to financial markets, the U.S. economy, and current and future American homeowners as the fate of Fannie Mae and Freddie Mac. The challenge for reform is to establish an institutional structure for mortgage finance that maintains the best outcomes of the earlier system and corrects its flaws. Under their proposal Fannie and Freddie would become private companies that buy conforming mortgages and bundle them into securities that are eligible for government backing. The federal government would offer a guarantee on mortgage-backed securities composed of conforming loans. This guarantee would be explicit, backed by the full faith and credit of the United States. To compensate taxpayers for taking on housing risk, Fannie and Freddie would pay an actuarially fair fee to the government in return for the guarantee, and the shareholders of the firms would take losses before the government guarantee kicks in.
Donald Marron and Phillip Swagel are regular contributors to Economics 21. Marron is director of the Urban-Brookings Tax Policy Center, a visiting professor at the Georgetown Public Policy Institute and president of Marron Economics LLC. Swagel is a visiting professor at the McDonough School of Business at Georgetown University, where he teaches classes on financial markets and directs the Center for Financial Institutions, Policy, and Governance.
About Economics21: A new nonprofit, nonpartisan organization dedicated to economic research and innovative public policies for the 21st century. We aim to advance free enterprise, fiscal discipline, economic growth, and the rule of law. Drawing on the expertise of practitioners, policymakers, and academics, we will encourage a spirited debate about the way forward for democratic capitalism. Visit www.economics21.org for more information.