Risk Sharing Scrutiny Underscores Impracticality of Scrapping Fannie Mae, Freddie Mac and the Need for Capital

Risk Sharing Scrutiny Underscores Impracticality of Scrapping Fannie Mae, Freddie Mac and the Need for Capital by Investors Unite

Recently, calls for replacing the GSEs have turned into proposals for reforming them – which is an acknowledgement of numerical realities.  Of course, any viable reform idea for institutions that support $5 trillion of the $9-trillion U.S. mortgage market must address where capital would come from and how to distribute benefits and risks in a new regime.

A piece by former FDIC Chairman Bill Isaac in the American Banker, “Risk Sharing is no Substitute for Capital at Fannie and Freddie,” and a forum yesterday by the Bipartisan Policy Center put a spotlight on the critical...