Fannie and Freddie Need Fixing —Urgently: A Response to Joe Nocera

Diego ZuluagaYesterday, Joe Nocera penned an extraordinarycolumn expressing his bafflement at the Trump administration ’sdrive to release Fannie Mae and Freddie Mac, two firms that purchase and guarantee around half of single-family mortgages in the United States, from government conservatorship. Nocera argues against such a move, writing that “if it ain’t broke, don’t fix it . . . Fannie Mae and Freddie Mac ain’t broke.”The piece is disconcerting from start to finish. Nocera writes that Fannie and Freddie make the 30-year fixed-rate mortgage, a product common only in the U.S., possible and thereby “help more people attain the American dream of homeownership.” Nocera neglects to mention that the U.S. homeownership rate, at 64 percent, isthe same as it was in the late 1960s, long before mortgage securitization. This rate is lower than those of other Western countries (Table 1) andparticularly low for minority Americans.Table 1. Homeownership Rate, Selected CountriesCountryHomeownership RateCanada67.8%France65.1%Germany51.5%Japan62.0%Italy72.4%Netherlands68.9%Spain76.3%United Kingdom65.1%United States64.8%Source: Eurostat; Statistics Canada; Statistics Japan; U.S. Census Bureau. 2013 data for Japan, 2016 data for Canada, 2019 data for all other countries.Nocera is correct that the 30-year fixed-rate mortgage probably wouldn ’t exist without Fannie and Freddie, which are only (barely) going concerns today thanks to U.S. taxpayers. But countries without this pro...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs