{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

WSJ headlines and questions for February 21 2011

WSJ headlines and questions for February 21 2011 - The...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
WSJ headlines and questions February 21, 2011. WSJ Headline February 12-13. Views of Life After Fannie, Freddie. White House Sees Three Ways to Shrink or Eliminate U.S. Backstop for Housing The White House issued some short-term (5-7 years) plans for Fannie Mae and Freddie Mac and three options for the long run. In the short run, the roles of Fannie and Freddie would be reduced, with a reduction in the maximum size of loans financed, an increase in the fees that the mortgage giants charge lenders, and an increase in the down payment to a minimum of 10%. The first option for the long run is to just eliminate Fannie and Freddie, letting the private sector handle securitization with no government backing. The second option would be to have no government backing except during financial shocks, in which case the government would step in and guarantee or buy MBS.
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

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?...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern