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2019-09-15 — yahoo.com

It's official: The Trump administration has a plan to deal with mortgage giants Fannie Mae and Freddie Mac -- by returning them to the same quasi-governmental form that set them up for failure in the 2008 financial crisis. If executed, it's likely to be a win for a small coterie of hedge funds, and a big loss for everybody else.

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There are better options. For example, Fannie Mae and Freddie Mac could be merged into a single, fully government-owned corporation that would transfer most of its credit risk to private investors, retaining just the catastrophic risk that only the government can bear. This would get private capital involved without letting it so easily shift risk to taxpayers. Pricing the guarantee correctly would be easier. This in turn would promote more competition from completely private lending channels. As it happens, Fannie Mae and Freddie Mac have already been moving in this direction, issuing special credit-risk-transfer securities and creating a common mortgage-securitization platform.

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