Sir, Lawrence Summers ("Wake Up to the Dangers of a Deepening Crisis", November 26) thinks the U.S. government needs to take immediate steps to increase mortgage credit availability, including using Fannie Mae and Freddie Mac to do so. In the same edition, your report "Tough stance on Fannie and Freddie is vindicated" suggests that instead these government-sponsored enterprises should continue to be constrained.

Who is right? Dr Summers is.

A government-sponsored entity (GSE) regulator, with a narrow role assigned by Congress, would of course worry about Fannie and Freddie's capital ratios. But from the broader view of the Congress itself, there is far greater risk to the financial system and the country from a crisis-induced shrinkage of mortgage credit and a possible downward-spiralling debt deflation than from whether Fannie and Freddie might develop low capital ratios.

Thus I propose that Fannie and Freddie should each be given by Congress a special $100billion new portfolio authority, to be used 100 per cent for--that is, only for--the refinancing of troubled subprime mortgages. They will easily be able to finance this new portfolio authority with issuance of their government-sponsored debt.

The only real excuse for Fannie and Freddie to exist at all is to help in times of housing finance crisis. Well, the housing finance crisis is here.

Alex J. Pollock is a resident fellow at AEI.