Insight & Thought Leadership on the Global Economy

He is a master of digging up data and then explaining it in a language foreign to most economists: plain English — David Leonhardt, Washington Bureau Chief, The New York Times

Evaluating the Corker-Warner Bill

Housing finance reform received an important boost last month with the introduction in Congress of the Housing Finance Reform and Taxpayer Protection Act of 2013.1 The bipartisan legislation, written by Senators Bob Corker (R-TN) and Mark Warner (D-VA), represents a serious plan to resolve Fannie Mae and Freddie Mac and fix the nation’s broken housing finance system. The system’s current dysfunction is evident: Nearly nine out of 10 U.S. mortgage loans today are being made by the federal government via Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Department of Veterans Affairs (see Chart). Taxpayers are thus taking on the risks inherent in about $1 trillion in mortgage loans originated each year.2 This is unnecessary, given that private financial institutions are willing, and with some guidance from regulators, able to safely make these loans.

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