On civil liberties and freedom, nuclear power, lighting, computers of the future, Standard & Poor's, Burlington House The Economist Newspaper and The Economist Grou
Kobe Bryant Shoesp. All rights reserved.
It would be better if instead of letting Fannie and Freddie
Juicy Couture Outlet become even more bloated, politicians saw the GSEs for the anachronism they are. They were set up decades ago to help banks pool concentrated regional mortgage risk and to make housing more affordable. But as the market has grown de
Juicy Couture Handbagseper and more sophisticated, history has left them behind—hence their desire to get into a
Monclerny bit of the business that will turn a profit. The eventual aim should be to turn them into normal private-sector companies, by stripping them of the charters that give rise to the implicit government guarantees, and break them into smaller pieces. Encouraging another growth spurt, even in today's sagging market, is asking for trouble.
as much GSE debt as they want. Many have amounts that exceed their
Moncler Outletregulatory capital.
Moreover, even if they grow no more, the mortgage giants pose a clear systemic threat. Their portfolios of retained mortgages and mortgage-backed securities add up to no less than $1.4 trillion. It is bad enough that this is concentrated in two institutions. Worse, they lack discipline because of the implicit guarantee. No matter how much risk they take or how they manage it, they can borrow at rock-bottom interest
Moncler Jackets rates. If they got into trouble, banks as well as taxpayers would be on the hook.
It is also riskier. When they hold a mortgage, they take on not only credit risk
Red High Heels but also interest-rate and prepayment risk. The loans they guarantee, in contrast, carry only credit risk (the other risks are borne by the investor in the securities). So as well as being just as eff
Red Bottom Shoesective, the guarantee business is also safer—and thus better for the taxpayer who unwittingly stands behind the GSEs. It is worth recalling that when Fannie and Freddie were caught mis-stating earnings by a combined $11 billion a little while ago, the mismanagement of interest-rate risk, not credit risk, caused their problems.
