The Corner

The Candidates on Fannie and Freddie’s Future

Freddie Mac has played a large role in the presidential race: Newt Gingrich’s work for it has served as one of Mitt Romney’s key lines of attack. But all of the conversation has been backward looking: The candidates have said very little about what they would seek to do about Freddie (and Fannie Mae) in office.

The two most specific plans have come from Ron Paul (naturally) and Rick Santorum. Paul said two years ago that Fannie and Freddie should be abolished and replaced with nothing. Santorum has also said he wants to phase out Fannie and Freddie.

Romney criticized Fannie and Freddie in his book No Apologies, and in a September forum said that “The failures of Fannie Mae, Freddie Mac, Barney Frank, Chris Dodd are just so legion that we have to rethink about how we’re going to support a growing housing industry.” In Florida, he said that the basic model of these government-sponsored enterprises was flawed because they keep all the profits while taxpayers bear all the risk. In an email to me, Romney spokesperson Andrea Saul got a little more specific: “Gov. Romney believes we need a fundamentally different housing-finance model than the one that led to the taxpayer bailouts of Fannie and Freddie. We need a model based on private capital, and one that doesn’t leave the taxpayer on the hook. What we learned from the Fannie and Freddie fiasco was that when politicians mess with the market, truly bad things can happen.”

Gingrich is the candidate least hostile to the Fannie/Freddie model. In a September debate, Gingrich said there was “a good case for breaking up Fannie Mae and Freddie Mac and getting much smaller institutions back into the private sector to be competitive and to be responsible for their behavior.” The comment about getting them “back” into the private sector appears to imply that before being taken into conservatorship Fannie and Freddie were best seen as part of the private sector. In more recent debates, Gingrich has placed more emphasis on the defense of the GSE model than on the reform he hinted at. He has repeatedly analogized Fannie and Freddie to credit unions. “There are a lot of government-sponsored enterprises that are awfully important and do an awfully good job,” he said in a debate in Tampa, adding that Fannie and Freddie had in the past been among them. (John Berlau explains the difference between the credit unions and the GSEs here.)

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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