Fannie Mae and Freddie Mac:
How Government Housing Policy
Failed Homeowners and Taxpayers
and Led to the Financial Crisis
Testimony before the
Committee on Financial Services,
Subcommittee on Capital Markets and
Government Sponsored Enterprises
United States House of Representatives
March 6, 2013
John L. Ligon
Policy Analyst
Center for Data Analysis
The Heritage Foundation
After more than three decades of experience with boom and bust cycles in the housing market, which have affected not only household income and wealth but also financial markets, federal policymakers should seriously reconsider the federal government’s role in shaping housing policy through GSEs such as Fannie Mae and Freddie Mac. These institutions distort the U.S. housing and mortgage markets at substantial risk to households and U.S. taxpayers.
Eliminating the present role Fannie Mae and Freddie Mac play in the U.S. mortgage market could save billions of taxpayer dollars in the U.S. mortgage market through eliminating the subsidy that has induced U.S. households to take on more debtrelated consumption, ending up underwater. Many households were never in position to handle such debt; therefore, subsidizing them to become homeowners is not only inconsequential in raising homeownership but also detrimental to the financial market.
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