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Unformatted text preview: The third option would be to have private firms buy mortgages and securitize them and have the government guarantee the securities in return for an explicit fee, provided that the securities met certain criteria, similar to deposit insurance. Questions: 1. Would the short run solution result in higher mortgage rates and fewer home purchases? If so, is this a good thing or a bad thing? 2. Which long term option do you favor and why? 3. Under the first option, wouldn’t mortgages be treated by the government like any other loan (subsidized by the negative net regulatory burden, especially deposit insurance)? 4. Isn’t the second option pretty much like the old system where Fannie and Freddie were private entities except during a financial shock in which case they got bailed out?...
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This note was uploaded on 07/02/2011 for the course FINA 465 taught by Professor Berger during the Spring '11 term at South Carolina.
- Spring '11