Report Urges Fannie And FreddiePrivatization

WASHINGTON - (10/04/04) -- A new report issued Friday by amajor Washington think tank calls for the full privatization ofsecondary mortgage market giants Fannie Mae and Freddie Mac. Thereport, by the Cato Institute, concludes that the U.S. housingmarket is so deep that the government backing of the two housingentities is no longer necessary and that taxpayers may be on thehook for billions of dollars in the event of a major financialcrisis affecting one or both of the companies. The Libertarianthink tank released its report just as Congress is stepping up itsinvestigation into the growing accounting scandal at Fannie Mae andits sister secondary market giant, Freddie Mac, prompting some onCapital Hill to revisit the privatization issue. Both governmentsponsored enterprises are stockholder owned, but are implicitlysupported by the federal government through their governmentcharters. There is recent precedent for privatization of agovernment sponsored enterprise, with Sallie Mae, the student loangiant, now nearing completion of a privatization. The Fannie Maereport was written by New York University economist Lawrence White,author of a 2002 study urging the separation of the National CUShare Insurance Fund from NCUA.