Sunday, August 22, 2010

I am Orren Boyle

From Greg Mankiw's blog, notes by economist Phil Swagel on last week's Washington conference about reforming Fannie Mae and Fredde Mac:
Hints of reform. Treasury Secretary Timothy Geithner said that the administration supported fundamental GSE reform but with still a government guarantee for housing finance in some form...

Industry participants love government guarantees. Conference participants from industries involved with the financing and construction of homes assert that no American will ever buy a home again if the government does not provide a full credit guarantee against the financial market consequences of people defaulting on their mortgages. And that guarantee needs a fair (that is, low) price. Bill Gross made some news in calling for full nationalization of housing finance and complete guarantees on mortgage capital. He prefaced this by saying that he was speaking on behalf of public policy and not his firm. Mr. Gross is smart and was exceedingly public-minded during the financial crisis (even, yes, while profiting from some astute investment calls). There is no doubt that he means well. But it’s scary to think about what he might suggest when he speaks for his book of business instead of the public interest.

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