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What to Do About the GSEs?

Author

Listed:
  • Lawrence J. White

    (Stern School of Business, New York University, New York, NY 10012)

  • Matthew P. Richardson

    (Stern School of Business, New York University, New York, NY 10012)

  • Stijn Van Nieuwerburgh

    (Stern School of Business, New York University, New York, NY 10012)

Abstract

Fannie Mae and Freddie Mac, the two large government-sponsored enterprises (GSEs) that are at the center of US residential mortgage finance, are “elephants in the room” that are being ignored as part of broad-brush financial sector reform. Neither the Dodd–Frank Act nor recently proposed overhauls of Dodd–Frank have addressed reform of the GSEs’ structures, although the GSEs were placed in government conservatorships in early September 2008 and have remained in that state since then. In this article, we review what the GSEs do and how they got themselves into financial difficulties, and we provide an overview of some of the major proposals for reforming the US residential mortgage finance system. We conclude with our own ideas and suggestions for how housing finance, as well as housing policy more generally, should be reformed.

Suggested Citation

  • Lawrence J. White & Matthew P. Richardson & Stijn Van Nieuwerburgh, 2017. "What to Do About the GSEs?," Annual Review of Financial Economics, Annual Reviews, vol. 9(1), pages 21-41, November.
    • Handle: RePEc:anr:refeco:v:9:y:2017:p:21-41
    DOI: 10.1146/annurev-financial-121415-033047
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    More about this item

    Keywords

    Fannie Mae; Freddie Mac; government-sponsored enterprises; housing finance reform; mortgage-backed securities; mortgages; residential mortgage finance; secondary mortgage markets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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