"In other words, the private-label market might have rebounded more quickly in the absence of Fannie Mae and Freddie Mac," according to the CBO.
If Congress was to take the step of privatizing the GSEs, the transition would have to be done carefully and slowly because Fannie and Freddie play such a dominant role in the mortgage market. Still, fully privatizing the secondary market would pose two risks: that the government may not fully be able to remove itself from rescuing companies that fail and that privatization would not ensure a "stable supply" of credit to housing in times of crisis.
Some might argue that it's not up the federal government to ensure a stable secondary market. And corrections in markets are sometimes healthy. Finally, as taxpayers we should be concerned with this final analysis.
If investors still perceived the government would be willing to bail out firms considered too big to fail, institutions in the secondary mortgage market could continue taking excessive risks, exposing taxpayers even without Fannie and Freddie.Read it all
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