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  • Issue Brief posted April 3, 2014 by Norbert J. Michel, Ph.D., John L. Ligon U.S. Financial Markets Do Not Need a New Regulator: Senate Misses the Mark

    Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and both would replace the GSEs with a new…

  • Backgrounder posted April 1, 2014 by Norbert J. Michel, Ph.D. The Financial Stability Oversight Council: Helping to Enshrine “Too Big to Fail”

    The 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act was Congress’s response to the 2008 financial crisis. Yet many of the act’s components do virtually nothing to fix the root causes of the financial crisis and simply expand the government’s reach into financial markets. Some of the biggest changes are in the nonbank financial sector, where Dodd–Frank…

  • Issue Brief posted March 27, 2014 by Norbert J. Michel, Ph.D., John L. Ligon Johnson–Crapo Housing Finance Reform Misguided

    Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but both would also replace the GSEs…

  • Issue Brief posted March 20, 2014 by Norbert J. Michel, Ph.D. Camp Bill Keeps Good Debate Going, but Bank Tax Embeds “Too Big to Fail”

    Ways and Means Committee Chairman Dave Camp (R–MI) has performed a valuable service in highlighting the need to reform the tax code, but the draft proposal falls short of what is needed. In particular, the plan’s new “bank tax” would embed the anti-market principle that certain financial companies are too big to fail. The bank tax would actually magnify the government’s…

  • Commentary posted March 14, 2014 by Norbert J. Michel, Ph.D. Housing Market Doesn't Need Government To Do Its Job

    When Fannie Mae and Freddie Mac went into federal conservatorship in 2008, industry lobbyists leapt to save government guarantees in the housing finance markets. The National Association of Realtors was particularly ardent, insisting the 30-year fixed-rate mortgage would disappear without government backing. Put aside the question of whether public policy should favor…

  • Commentary posted February 27, 2014 by Norbert J. Michel, Ph.D. Government guarantees make housing market worse

    Does the housing-finance system require government guarantees? We’re often told it’s worked so well for so long that reforms should only tweak things. The market won’t survive, it’s said, if we completely eliminate those guarantees. But the reality is that if the system had worked, we wouldn’t have had millions of home foreclosures. Taxpayers wouldn’t have spent $200…

  • Backgrounder posted February 7, 2014 by John L. Ligon, Norbert J. Michel, Ph.D. GSE Reform: The Economic Effects of Eliminating a Government Guarantee in Housing Finance

    The U.S. government was barely involved in the housing finance market before the Great Depression. Subsequently, the Federal National Mortgage Association (commonly known as Fannie Mae) and the Federal Housing Administration (FHA) attained an almost legendary status for having “saved” the housing market in the 1930s with various forms of government guarantees. The…

  • Backgrounder posted January 29, 2014 by Norbert J. Michel, Ph.D. The Fed at 100: A Primer on Monetary Policy

    Monetary policy refers to altering the amount of money in an economy (its money supply) to promote economic growth and stability. Getting monetary policy right is critical because the wrong money supply can severely alter the economy even if the government’s fiscal (tax and spending) policies are ideally suited to economic growth. The Federal Reserve (the Fed), the…

  • Issue Brief posted December 17, 2013 by John L. Ligon, Norbert J. Michel, Ph.D., Filip Jolevski GSE Reform: FHFA Should Not Pursue Mortgage Principal Reduction Alternatives

    Should the Federal Housing Finance Agency (FHFA) expand home mortgage modification policy to include principal reduction alternatives (PRAs)? For the past five years, the FHFA has maintained a consistent stance that implementing a PRA policy would come at a high cost to taxpayers with little benefit overall to homeowners. On the other hand, the Federal Housing…

  • Commentary posted November 20, 2013 by Norbert J. Michel, Ph.D., John L. Ligon Why are Fannie and Freddie funding advocacy?

    Fannie Mae and Freddie Mac have been in federal conservatorship since 2008. Should these government-sponsored housing enterprises — essentially broke — still be required to spend taxpayer money to fund activities of housing advocacy groups? Five years ago, Congress left this question unanswered, but Ed DeMarco, the acting head of the enterprises’ regulator, took the…

  • Issue Brief posted November 12, 2013 by Norbert J. Michel, Ph.D., John L. Ligon GSE Reform: Affordable Housing Goals and the “Duty” to Provide Mortgage Financing

    As Congress considers legislation to eliminate the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, advocacy groups are pressuring financial institutions to adhere to a “duty to serve” their markets rather than to meet specific affordable housing goals. The “duty to serve” is a nebulous concept that codifies the idea that the GSEs (and lenders) have a…

  • Commentary posted November 8, 2013 by James L. Gattuso, Norbert J. Michel, Ph.D. Give markets a try

    Five years ago, financial markets were rocked by news that Fannie Mae and Freddie Mac – two privately-owned but government-sponsored firms considered mainstays of the U.S. housing finance system – had been placed into conservatorship by federal officials. Their collapse was quickly followed by the near-collapse of other financial giants invested in housing related…

  • Issue Brief posted November 7, 2013 by Norbert J. Michel, Ph.D., John L. Ligon GSE Reform: Trust Funds or Slush Funds?

    Should Fannie Mae and Freddie Mac—the two government-sponsored housing enterprises (GSEs) in federal conservatorship since 2008—be required to use taxpayer money to fund housing advocacy groups’ activities? Five years ago, Congress answered “yes” to this question. The requirement has been in limbo since the GSEs collapsed, but that is only because Ed DeMarco, the acting…

  • Backgrounder posted November 7, 2013 by Norbert J. Michel, Ph.D., John L. Ligon Fannie and Freddie: What Record of Success?

    The fact that Fannie Mae has been around since the 1930s has led some to suggest the U.S. housing system functioned beautifully until the recent crisis. One policy analyst recently stated that under the system of government-sponsored enterprises (GSEs), “Mortgage credit was continuously available well into the late-1990s under terms and at prices that put sustainable…

  • Commentary posted September 15, 2013 by Norbert J. Michel, Ph.D. The real reason for the 2008 financial collapse

    Sept. 15 marks the five-year anniversary of the Lehman Brothers bankruptcy, the supposed spark that set off the financial crisis of 2008. Conventional wisdom holds that it was the federal government's decision against bailing out this investment bank that froze credit markets and sent the economy into the "great recession." A Wall Street Journal story about the Lehman…