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On this episode of the AEI Events Podcast, panelists discuss whether Fannie Mae and Freddie Mac should be shrinking or expanding their activities.
AEI’s Edward J. Pinto likened government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to the 1958 cult classic “The Blob” due to their continued expansion of the credit box.
Fannie Mae and Freddie Mac will soon “celebrate” their 10th anniversary of being in government conservatorship. They are under the total control of the Federal Housing Finance Agency, have virtually zero capital, and are utterly dependent on the guaranty of the US Treasury, which is the de facto owner.
Should they be shrinking their activities or expanding them? How can private companies compete with their infinite leverage, broad regulatory exclusions and benefits, and government backing? What kind of regulatory approvals should be required before Fannie and Freddie exploit these powers in new lines of business? Can a future capital regime address the market distortions Fannie and Freddie otherwise create?
This event took place on July 12, 2018.
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