Legislation Inspires a New GSE Debate

American Banker (08/06/08) P. 1; Sloan, Steven
A debate already has been sparked by the new housing bill, centering on conflicts between Fannie Mae and Freddie Mac's affordable housing mission and its public-private business model that involves boosting shareholders' profits. Steve O'Connor, senior vice president of government affairs at the Mortgage Bankers Association, noted, "It has long been an issue of some controversy, but the [Treasury authority] brings it back to the fore as a matter that has to be considered." While observers believe privatizing the government-sponsored enterprises (GSEs) would increase competition, others worry that Fannie Mae and Freddie Mac would shrink their portfolios and reduce business because the lack of implicit government backing would dramatically hike costs. With regard to nationalization, critics insist it would raise the national debt and turn the GSEs into another FHA.