The future of Fannie Mae and Freddie Mac is becoming cloudier. Legislation in Congress and a clear lack of support at the Treasury are harbingers of political difficulties ahead. Perhaps more important is the fact that these two government-sponsored enterprises (GSEs) are growing faster than the housing market. By the end of 2003, they will bear the risk of almost half of all mortgages in the United States. At some point, no matter how generously they interpret their charters, they will run out of things to buy. In other words, change is inevitable; it’s only a matter of time.

In these circumstances, what future for Fannie Mae and Freddie Mac should policy-makers be considering? There seem to be four general approaches: (i) shedding the government’s risk through full privatization; (ii) forcing pass-through of the GSEs' subsidy by enhancing competition; (iii) requiring greater use of the subsidy in support of housing policy; or (iv) recapturing the subsidy through taxes, fees, and similar means. This conference will examine those options in detail.