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Debate: Fannie Mae and Freddie Mac

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Should Fannie Mae and Freddie Mac exist, or be dismantled?

Background and context

NYTimes Room for Debate series on this topic: In 1938, Fannie Mae and Freddie Mac were created to package and secure mortgage lenders' loans. Congress commissioned these two entities to package loans in a way that guarantees the purchaser the principle and interest back in whole. Congress commissioned the two entities to provide liquidity and stability to the loans. The government sponsored agencies also purchased some of these loans and included them as part of their portfolios. [1] Nine out of ten American mortgage loans are provided by Fannie Mae and Freddie Mac's services. During the 2008 financial crisis, their $5.6 trillion portfolio began to fail. As a result, the government bought them out to soften the banking crisis. The US Treasury recently introduced its plans to do away with the two firms. The government's stated intentions for closing down the entities are to rebalance the ratio of home ownership to home renting. BY 2016-2018, the Treasury plans to enact new regulations that create a smooth transition from a government-based economy to a private sector. [2]

Arguments

Pro

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Con

Click "edit" and write arguments here There's too much debt tied up in Fannie Mae and Freddie Mac to dismantle the agencies. Half of our country's $11 trillion in debt is in these agencies. New institutions take too long to implement when we have such an extensive debt history with these two entities. http://online.wsj.com/article/SB10001424052748704509704575019162391608940.html




Pro/con sources

Pro

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Con

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External links

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