Facts matter: Sign up for the free Mother Jones Daily newsletter. Support our nonprofit reporting. Subscribe to our print magazine.

Felix Salmon — tanned, rested, and ready — reads three op-eds about Fannie Mae and Freddie Mac in the New York Times today and comes away unimpressed. Whatever you might think of Fannie and Freddie, they aren’t going away anytime soon:

The fact is, as John Carney says in his own op-ed (the most sensible, but also the narrowest, of the three), that the FHA and Frannie now back more than 95 percent of new mortgages. If they simply stopped buying new mortgages, the entire housing-finance business in the US would come to a screeching halt. No one could buy, no one could sell, and home values would be entirely hypothetical for years.

Yes, it’s possible to slowly build an entirely private system of mortgage lending. But you can’t do that overnight, as Poole seems to think. And he’s completely wrong, too, when he says that “if the home finance market were fully private, then it would bear the losses from its own mistakes in pricing and insurance”. Not true: when there’s a major housing crash, the government ends up bailing out the lenders whether they’re public or private. Look at Ireland.

Two thoughts come immediately to mind. First, the only reason Fannie and Freddie are semi-public institutions in the first place is because the private markets wanted nothing to do with buying up mortgages when the idea was first broached. The original plan was that the FHA (created in 1934) would guarantee home loans and private industry would then step in to create a secondary market. But private industry wasn’t interested, so in 1938 Fannie Mae was created to do it instead. So the question is: what’s changed since then? If private industry wasn’t interested in 1934, what makes us think they’d be interested now?

The answer, of course, is that lots of things have changed. But that’s a two-edged sword and it leads to the second obvious thought: most European countries don’t have anything similar to Fannie and Freddie, and they still manage to sell lots of houses there. There are pluses and minuses to the European model (and there have been proposals in the past to create an EU-wide GSE like Fannie and Freddie), but still, the fact that the European housing market exists and works adequately suggests that the U.S. could get by without Fannie and Freddie if we wanted to.

But, as Felix says, we probably can’t get rid of them too quickly. We don’t need another housing bubble, but neither do we need another housing crash. So while a private secondary market might be able to take Fannie and Freddie’s place, it’s going to take a while to create one that keeps the housing market working smoothly. In the meantime, we should concentrate on workable foreclosure reform and sensible housing policies, not bubble-era stuff like $1000-down mortgages. Fannie and Freddie need to be taken care of, but there’s no rush.

REAL QUICK, REAL URGENT

Minority rule, corruption, disinformation, attacks on those who dare tell the truth: There is a direct line from what's happening in Russia and Ukraine to what's happening here at home. And that's what MoJo's Monika Bauerlein writes about in "Their Fight Is Our Fight" to unpack the information war we find ourselves in and share a few examples to show why the power of independent, reader-supported journalism is such a threat to authoritarians.

Corrupt leaders the world over can (and will) try to shut down the truth, but when the truth has millions of people on its side, you can't keep it down for good. And there's no more powerful or urgent argument for your support of Mother Jones' journalism right now than that. We need to raise about $450,000 to hit our online fundraising budget in these next few months, so please read more from Monika and pitch in if you can.

payment methods

REAL QUICK, REAL URGENT

Minority rule, corruption, disinformation, attacks on those who dare tell the truth: There is a direct line from what's happening in Russia and Ukraine to what's happening here at home. And that's what MoJo's Monika Bauerlein writes about in "Their Fight Is Our Fight" to unpack the information war we find ourselves in and share a few examples to show why the power of independent, reader-supported journalism is such a threat to authoritarians.

Corrupt leaders the world over can (and will) try to shut down the truth, but when the truth has millions of people on its side, you can't keep it down for good. And there's no more powerful or urgent argument for your support of Mother Jones' journalism right now than that. We need to raise about $450,000 to hit our online fundraising budget in these next few months, so please read more from Monika and pitch in if you can.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate