7 Steps Needed to Improve Housing Finance

When Fannie Mae and Freddie Mac collapsed they lost all the combined aggregate profits they had made in the 35 years from 1971 to 2006, plus losses of another $150 billion or so.

As the United States approaches the bottom of the housing bust, American Enterprise Institute (AEI) housing expert Alex Pollock explains in a recently published piece that there are seven necessary steps to avoid another housing collapse.

1. Not counting the taxpayers' investment, Fannie and Freddie are hopelessly insolvent.

2. They should be formally included in the federal budget.

3. Over the next five years, Fannie and Freddie should be divided into three parts.

4. Credit risk retention by the originators of mortgages should be encouraged.

5. A formal goal of creating a private secondary market for prime, middle class mortgages should be set.

6. Savings should be an explicit goal of housing finance. The need to pay off the mortgage loan over time must be stressed.

7. We should inject countercyclical factors into housing finance, instead of the current procyclical ones.

Alex Pollock had an extensive and varied career in banking, including serving as President and CEO of the Federal Home Loan Bank of Chicago for over a decade, before joining AEI. He is available by phone at 202.862.7190 or through steffanie.hawkins@aei.org

For help reaching any AEI scholars and for all other media requests, please contact Jesse Blumenthal at jesse.blumenthal@aei.org (202.862.4870).

AEI's in-house ReadyCam TV studio may be booked by calling VideoLink at 617.340.4300. For radio interviews, please e-mail jesse.blumenthal@aei.org to reserve AEI's ISDN facilities.

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About the Author

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org

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