BankThink Don’t reinvent the wheel on housing finance: Restore Fannie and Freddie

Tackling the last piece of unfinished business from the 2008 financial crisis is a top priority for policymakers — the big question is how to do it.

Recently, an early draft of legislation aimed at reforming the twin housing giants Fannie Mae and Freddie Mac was made public. The proposed legislation, sponsored by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., comes just weeks after Federal Housing Finance Agency Director Mel Watt laid out his own ideas about the future of the government-sponsored enterprises. At the same time, Treasury Secretary Steven Mnuchin has articulated three core principles for reform: protect taxpayers, end government ownership and preserve the 30-year mortgage.

Yet unlike Secretary Mnuchin’s and Director Watt’s stated policy preferences, the Corker-Warner proposal would continue to keep Fannie and Freddie in conservatorship until certain metrics of competition could be met.

As policymakers evaluate options, an enlightened blueprint for reform put forward by investment firm Moelis & Co. warrants close attention.

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