The end of Fannie and Freddie?
It could be curtains for Fannie and Freddie. Fannie Mae and Freddie Mac are government back mortgage entities that taxpayers bailed out to the tune of billions of dollars after the housing market crash.
Washington has been debating how to reform Fannie and Freddie ever since the crash. There is currently a proposal in Congress that would dismantle Fannie and Freddie, and Marketplace’s economics guy Chris Farrell is a big supporter of the idea.
“Everyone agrees we need to do something about them,” Farrell says. “I say, look, the taxpayer is still on the hook. Let them fade into the dustbin of history.”
If Fannie and Freddie were killed off, so to speak, interest rates on mortgages will go up, and, according to Farrell, the 30 year fixed-rate mortgage will likely disappear. To this, Farrell says, “So what?”
“We have an economy where there’s a lot of churn, and people lose their jobs, and they’re going to move a lot,” Farrell says. “So I say, why should we break so many incentives toward housing? Let’s just make housing another investment.”
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