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Bringing Back Subprime? The Hazards of Restructuring the GSEs

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  • Dean Baker
  • Nicole Woo

Abstract

There have been a number of proposals for replacing the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, with a system under which private financial institutions would issue mortgage-backed securities (MBS) that carry a government guarantee. This paper raises a number of questions about the merits of such a system. It points out that both the gains to low-income families seeking to become homeowners from such a system and interest rate savings are likely to be relatively modest, and that there are few obvious safeguards that would make this new system sounder than the system of privately-issued mortgage-backed securities in the bubble years.

Suggested Citation

  • Dean Baker & Nicole Woo, 2013. "Bringing Back Subprime? The Hazards of Restructuring the GSEs," CEPR Reports and Issue Briefs 2013-15, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2013-15
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    File URL: http://www.cepr.net/documents/publications/GSEs-2013-10.pdf
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    References listed on IDEAS

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    1. Rosen, Harvey S., 1985. "Housing subsidies: Effects on housing decisions, efficiency, and equity," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 7, pages 375-420, Elsevier.
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    More about this item

    Keywords

    housing; gses; mortgages;
    All these keywords.

    JEL classification:

    • H - Public Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • G - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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