ABSTRACT
This chapter will describe the two companies (Fannie Mae and Freddie Mac) and their special status in the US residential mortgage market, with the recommendation that their special status be terminated-i.e., that they be truly privatized. The two companies clearly have a special and extensive involvement with the federal government; it is no accident that the two companies are often described as "government-sponsored enterprises". The chapter also addresses a number of major issues that concern housing and its special place in the political landscape of America and adds an August 2008 postscript. In an important sense, the accounting scandals at the two companies were "sideshows" with respect to the important policy and regulatory issues that are the subject of this chapter. Truly privatizing the two companies, as well as pursuing a range of sensible reforms, would better encourage homeownership in ways that would improve the efficiency of the US economy and increase social welfare and equity.
