Bringing Back Subprime? The Hazards of Restructuring the GSEs

Dean Baker and Nicole Woo

CEPR Reports and Issue Briefs from Center for Economic and Policy Research (CEPR)

Abstract: There have been a number of proposals for replacing the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, with a system under which private financial institutions would issue mortgage-backed securities (MBS) that carry a government guarantee. This paper raises a number of questions about the merits of such a system. It points out that both the gains to low-income families seeking to become homeowners from such a system and interest rate savings are likely to be relatively modest, and that there are few obvious safeguards that would make this new system sounder than the system of privately-issued mortgage-backed securities in the bubble years.

Keywords: housing; gses; mortgages (search for similar items in EconPapers)
JEL-codes: G G2 G21 G28 H H2 H24 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ban, nep-pke and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:epo:papers:2013-15

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