December 07, 2015
Should Fannie And Freddie Be Replaced By Private Lenders?
Posted by David Zaring

Gretchen Morgenson says no, in a long front-page story in the Times, which should raise the hackles of any free-marketer.  I though Matt Levine's comments were smart.  The political economy of what to do about Fannie and Freddie is partly driven by the hedge funds who have taken big positions on the failed government agencies' stock, which wasn't wiped out when the government took the agencies over (and perhaps you can see how that structure is a weird one).  If they don't win their takings claims based on that takeover, they want a "recap and release," that is, they want Fannie and Freddie to go back to being the super profitable guarantors of mortgages that they used to be.  It's basically a big bet on Congress agreeing with them, because the current executive branch is dead set against it, and that seems like a very risky bet to me.  It is also buccaneering capitalists pushing for government support for residential mortgages, which you don't expect to see every day; it appears that Morgenson thinks the hedge funds are onto something.  

Anyway, the takings claim isn't a bad one - Steven Davidoff Solomon and I wrote about it here.

Administrative Law, Financial Crisis, Financial Institutions | Bookmark

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