Reforming the Big Three: The Economics of Government-Sponsored Enterprises

Apr 05, 2005


Dr. Jay Cochran
Senior Research Fellow
Mercatus Center at George Mason University

Click Here to listen to audio archive.

The U.S. Housing market has been the engine of growth for the domestic economy over the past several quarters.  During this time, the “Big Three” Government-Sponsored Enterprises (GSEs) - Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System - have become giants in the mortgage industry, and their expansion has far outpaced the growth of the mortgage market as a whole.  Supporters and detractors of GSEs argue over the extent to which they should be involved in mortgage lending, as well as the possible long-term consequences should the housing market decline.

On Wednesday and Thursday, April 6 and 7, the U.S. Senate Committee on Banking, Housing, and Urban Affairs will hold hearings on regulatory reform of the GSEs.  Featured witnesses include Federal Reserve Chairman Alan Greenspan, as well as the Secretaries of Treasury and HUD, John Snow and Alphonso Jackson, respectively.  Given the political ramifications of various reform proposals, these hearings will surely foster lively discussion, if not contentious debate. 

In advance of these hearings, the Mercatus Center at George Mason University invites you to consider GSEs through the lens of economics.  Senior Research Fellow, Dr. Jay Cochran, will present a brief overview of the “Big Three” and lead a discussion on the promises, challenges, and consequences of reform.  Participants will leave with a fuller understanding of the complexity of this issue, as well as an economic framework with which to assess the various reform proposals that cross their desks.  Senior staffers who handle banking and housing issues will find this seminar particularly useful.

In this seminar, we will consider questions such as…

  • How do GSEs’ congressional charters confer privileges on their operations?  What might those privileges be worth?
  • What benefits have GSEs provided to US housing markets?  How have these benefits been distributed over time?  Are they real or illusory?
  • How might alterations to GSEs business plans and practices effect the social benefits they produce?