Mortgage Bankers Want Fannie And Freddie To Get Explicit Government Guarantees

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It’s silly that we’d even wonder whether Fannie Me (FNM) and Freddie (FRE) have implicit or explicit backing from the government. The point is that they are backed by the government.

Still, according to WSJ, the Mortgage Bankers Association is pushing for a reform of the GSEs that would make them smaller though explicitly backed by the government. Basically, they want to be able to tell the Chinese that Fannie and Freddie bonds are as good as Treasuries and should be priced as such, which would have the effect of reducing interest rates and spurring more loan creation.

There’s really no good case, we can think of, for the middle ground. Either we get the government out of the mortgage business — not going to happen — or we makeit more explicit.

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