Fannie Mae and Freddie Mac can be repaired and made to repay the U.S. Treasury for costs of their bailouts, according to Joshua Rosner.
The managing director at Graham Fisher & Co. told the House Financial Services subcommittee Wednesday morning that many of the proposals to replace the GSEs seem to transfer many of their government subsidies to private entities.
The Bipartisan Housing Commission recently recommended winding down the GSEs and replacing them with a public guarantee entity or entities.
“Besides the other problems embedded in many of the proposals is the reality that such an approach does not seek, as a key purpose, the repayment of over $140 billion of funds owed to the U.S. Treasury,” he testified.
In addition, replacing Fannie and Freddie with alternatives will result in the loss in value of their proprietary data, patented processes, underwriting and securitization technologies, along with the scale of their MBS businesses.
As a Wall Street researcher, Rosner was highly critical of the private-label MBS market prior to the subprime meltdown.
Now he wants Congress to limit the GSEs' activities to prime loans and provide a secondary market for banks.
“Repairing their failures is an achievable goal,” he testified, and “would place them in their proper role as a countercyclical buffer supporting the private mortgage market.”
He also called proper regulation of Fannie and Freddie, setting their guarantee fees at market rates and limiting their portfolios to liquidity needs.