The Nationalization of Fannie Mae and Freddie Mac

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http://finance.yahoo.com/tech-ticker/article/37078/Were-All-Homeowners:-Nationalization-of-Fannie,-Freddie-Unavoidable

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Is it unavoidable?

With President Bush pushing Congress to pass housing legislation, some observers worry the government is going to go too far in trying to relieve stress in the housing sector.

But Richard Suttmeier, chief market strategist of RightSide.com, thinks the proposals to date don't go nearly far enough to battle what he calls a "cancer" that threatens to kill the economy if it's allowed to spread further.

Suttmeier's radical solution to the housing crisis? Nationalize Fannie Mae and Freddie Mac, the publicly traded "government sponsored enterprises" created by Congress to help maintain liquidity in the mortgage market. Nationalizing the GSEs would lower mortgage rates across the board, giving every homeowner in America a chance to refinance and new buyers cheap financing to help soak up the excess inventory of homes, Suttmeier argues.

We didn't get into the issue of whether the mortgage-backed securities market (i.e., investors) would support such a change, but Suttmeier's view is the solution to the housing crisis isn't "from the Fed down" -- as has been tried thus far -- "but from Main Street up."

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