Mortgagers' Dual Roles Clash

Wall Street Journal (06/12/08) P. A2; Wessel, David
The housing slump and mortgage crisis have complicated the roles played by Fannie Mae and Freddie Mac, which must struggle to balance the need to act in the best interests of shareholders with the need to make good on their affordable housing mission at a time when lenders are pulling out of the mortgage market. Experts say the government will not privatize or nationalize the government-sponsored enterprises (GSEs), given that lawmakers continue to butt heads over whether Fannie Mae and Freddie Mac should stimulate the economy by boosting lending or scale back operations to reduce taxpayer risk. In a recent essay, "The Great Credit Squeeze," Brookings Institution economists Douglas Elmendorf, Martin Baily and Robert Litan say the GSEs should be able "to operate under a set of rules that allows them to be profitable, but doesn't allow them to profiteer at the expense of taxpayers." However, experts point out that striking such a balance is a challenge.