We both went to Swarthmore College. Maybe that explains why we are on the same page on what to do about Freddie and Fannie, namely nothing. He writes,
In the years immediately following the financial crisis, there were few people who would have bet that, in 2018, the GSEs would still be in a conservatorship in which they are effectively publicly owned companies. Nonetheless, inertia has proven to be a powerful force. In this case, I would argue that it has been a force for good in the housing market. The current system is one that minimizes the problem of moral hazard in housing finance, which was so important in the run-up in prices in the housing bubble years. It also is the most efficient mechanism for financing mortgages, as it requires fewer resources to be wasted on housing finance.
I disagree about getting rid of mortgage-backed securities. I approve of risk being transferred to the private sector.
Go back to what I wrote in November.
the current system works about as well as one could hope. With the backing of the Federal government, agencies like Freddie Mac and Fannie Mae can keep the market supplied with adequate capital to provide 30-year fixed-rate mortgages. At the same time, by using securitization and credit risk transfers, the agencies off-load the greatest proportion of risk to private entities.
Of course, if you gave us carte blanche to change the system, Baker and I would go in very different directions.