Antoinette Schoar: The case for unwinding Fannie and Freddie

MIT Sloan Prof. Antoinette Schoar

From CBS News

Today Fannie Mae and Freddie Mac–two government-sponsored enterprises originally designed to increase the availability of loans and thereby raise levels of home ownership–dominate the US mortgage lending market. Fannie Mae, which was established in 1938 as part of Franklin Delano Roosevelt’s New Deal, provides local banks with federal money to finance home mortgages. Freddie Mac, created in 1970, underwrites mortgages that fall below a certain size threshold with the intention of helping homeowners get access the housing market. These mortgages are cheaper since they implicitly–and after 2008 explicitly–benefited from a government guarantee.

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