Implement AEI-Heritage-R Street GSE plan and honor shareholder contracts
Recent “draws” from the Treasury Department—i.e., taxpayer bailouts—for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac show the pressing need for reform of these quasi-governmental entities tasked with buying mortgages from banks in an attempt to encourage home ownership. Though the “draws” were not as large as some of the big ones we were made used to in the not-so-long-ago age of financial bailouts, they illustrate the vulnerability of the GSEs—and by extension, the taxpayers who are backing them—to the slightest economic volatility.
So it is welcome news that our friends from the American Enterprise Institute, Heritage Foundation, and the R Street Institute put forth a plan this week for the Trump administration to take steps to downsize the GSEs. Noting the deadlock in Congress over GSE reform—even among Republicans—the paper looked exclusively at options that don’t require congressional authorization.