Arnold Kling  

Mubarak, Freddie, and Fannie

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I write in the latest Weekly Standard,

Like Mubarak, the GSEs have seen their once formidable political position reduced to one of helpless isolation, abandoned by all former supporters. However, as in Egypt, deposing former leaders does not by itself ensure a happy outcome. American housing policy is afflicted with deep political pathologies, and unless these can be confronted and overcome, a future without Fannie and Freddie could turn out to be worse than the status quo.

Read the whole thing.

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COMMENTS (2 to date)
Maniel writes:

"The price of freedom is eternal vigilance." TJ
The point is that once you have sent the evil Fan and Fred on their way, your job is not done - it is never done. You must continue to work to defeat future schemes which favor one or more small groups at the expense of all of us.

Arnie writes:

In the article you talk about public backstopping in the mortgage market. That sounds like a kind of CDS. I haven't really ever seen why CDS's didn't work, other than they were priced way too cheaply since they were never intended to work since the government was really the final backstop.

It seems that true mortgage insurance could be established, but as you have suggested, it might be significantly more expensive than current versions, though way less so than the $20 trillion (or whatever number you chose) from the '08 to present disaster.

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