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.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.