October 01, 2008
Decouple Fannie and Freddie?
Most people seem to agree that the old Freddie/Fannie structure was the worst of all possible worlds: no government control, but an implicit government guarantee. Where they disagree is where we move from here.
Not surprisingly, progressives say that we should return them to their earlier structure, when they were government entities (as they are now under the buyout). Conservatives argue that they should be completely privatized.
I'm wondering whether this is one place where splitting the baby would make good sense from a policy perspective: take one of them and make it wholly public, and take the other completely private.
After all, Congress created two entities to compete with each other, so would it be unreasonable to have them compete as different systems? The tradeoff would be the security/Treasury guarantee of one vs. the private flexibility of the other.
I am hardly an expert in this, and perhaps the different structures would undermine the entire competition here, but if people have thoughts, as Ross Perot would say, I'm all ears.
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