As the US Congress prepares to debate how to replace Fannie Mae and Freddie Mac, those in politics and real estate who support a government-backed housing finance system are predicting calamity. Institutional investors, they say, will not buy U.S. mortgages or mortgage-backed securities unless they are guaranteed by the government. The numbers tell a different story, says Peter J. Wallison, a senior fellow at the American Enterprise Institute.
What all this shows is that institutional investors are not particularly interested in government-guaranteed assets. Thus, if we want U.S. and foreign institutional investors to invest in our mortgage market, we should be looking to a private system of mortgage finance, and not one run or backed by the government, says Wallison.
Source: Peter J. Wallison, Government Mortgage Guarantees Are Unnecessary, The Wall Street Journal, April 21, 2011.
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First published by the National Center for Policy Analysis, United States
FMF Policy Bulletin/ 26 April 2011
