Republican Home-­Owning

Ten years after failing and being rescued by our federal government, our nation’s principal secondary market makers in home mortgage loans – Fannie Mae and Freddie Mac – remain in federal receivership. The proximate reason for this is that neither Republicans nor Democrats in Congress have been able to find consensus – interparty or intraparty consensus – on what should be done with our home mortgage GSEs post-crisis. The deeper reason is that public – that is to say, citizen – ownership of secondary market makers in home loans is in a certain sense ‘natural’ in any republic, such as our own, where both middle class standing and that standing’s primary indicator – home-owning – are deeply ingrained in the citizenry’s self-ascribed national identity. This truth is yet more compelling when home prices, as they are bound to do anywhere homes are the primary middle class asset, become what I call 'systemically significant' -- that is, when they become pervasive determinants both of other prices and of broader macroeconomic wellbeing. I conclude that the only sustainable future for Fannie and Freddie, not to say for the American middle class and our other GSEs (including our student loan GSEs), is to be found in their past. Fannie and Freddie should be forthrightly made citizen-owned once again as Fannie was through our home markets’ healthiest decades.