Liquid Real Estate Issue 07
Fannie and Freddie: now it’s political
The future of US mortgage agencies Fannie Mae and Freddie Mac is in the hands of politicians. Hours after the $200 billion bailout was announced in early September, Senate Democrats were calling for hearings to analyse the causes of the government-sponsored entities’ (GSE) demise. How the agencies look after the credit crunch abates – if they survive at all – will largely depend on whether the Republicans or Democrats are in charge after the November election.
The Bush administration has always been clear when it comes to the GSEs – they offer too much potential for systemic risk. This view has been at least partly borne out over the past months. Under a McCain administration, what’s left of the GSEs would likely be privatized or phased out completely. Initial ideas from Democrats such as senator Barry Frank of Massachusetts indicate a preference for a hybrid structure. That means the GSEs...
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