Privatize Fannie, Freddie - Atlanta Fed Economist

WASHINGTON – An economist at the Atlanta Federal Reserve and an academic colleague on Wednesday urged privatizing mortgage finance giants Fannie Mae and Freddie Mac, saying they are unnecessary for the U.S. housing sector and pose risks to the financial system.

“The United States has too much housing (and not enough of other goods and services), and federal sponsorship of Fannie Mae and Freddie Mac exacerbates the problem,” Scott Frame of the Atlanta Fed and Lawrence White of New York University said in a paper posted to the Atlanta Fed’s website.

“Moreover, Fannie Mae and Freddie Mac do not do an especially good job of focusing on the low-and moderate income first-time buyer,” they said.

Repealing the companies’ congressional charters is unlikely to gain political support, the authors conceded, and recommended creating a stronger regulatory agency.

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