Posted by Brian
CBO: Full Privatization of Fannie, Freddie May Be Best Option
Tuesday, January 11, 2011
By Matt Cover
Congressional Budget Office (CBO) said that returning the secondary mortgage market to full privatization would force mortgage firms to be more responsible and might be the best option for taxpayers.
The CBO in a December 2010 paper assessed the problems of the Government Sponsored Enterprise (GSE) model of mortgage financing and assessed three options for moving the now-defunct GSEs – Fannie Mae and Freddie Mac – out of government conservatorship.
The options CBO considered were a new federal agency to replace the GSEs, a hybrid public-private entity not dissimilar to the current GSE model, and a fully privatized secondary mortgage market largely free of government intervention.
Among the three, the CBO found that a fully privatized market would work best at eliminating the risky behavior that led to the GSEs collapse in 2008 and the expensive public bailouts that continue today.
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