A new report published by the Bipartisan Policy Center commission says the government should reduce its role in the U.S. housing finance system, suggesting that Freddie Mac and Fannie Mae should be completely eliminated to encourage more private sector involvement. The commission recommends replacing the two entities with a new government body called the Public Guarantor.
Among the commission's members was a former Republican Florida senator, who said the change would not be "dramatic" and would allow for more private money to "flow into our nation's system." The Public Guarantor proposed by the report would provide a private secondary mortgage market with minimal risk. The commission contends that private companies should be required to shoulder the full burden incurred by poor lending decisions. The government would allow these firms to suffer the resulting effects with no expectation for bailouts for shareholders.