Economist Peter Schiff criticized America’s two most prominent housing finance institutions, blaming them for the current housing affordability crisis.
Freddie And Fannie Make Housing More Expensive
On Wednesday, in a post on X, Schiff argued that the Federal National Mortgage Association (OTC:FNMA), or Fannie Mae, and the Federal Home Loan Mortgage Corp. (OTC:FMCC), or Freddie Mac, “don’t make homeownership more affordable,” in fact, he says, “they make it more expensive.”
Schiff says, “By inflating demand, they jack up prices, forcing buyers to take on more debt,” which he says has led to the “American Dream” turning into a debt trap.
He also says that in the end, taxpayers will be “left holding the bag,” referring to the two institutions being under government conservatorship since 2008, during the Great Financial Crisis, when they were both on the verge of going bankrupt.
Schiff concludes his post saying, “The best move is to abolish both,” as President Donald Trump recently hinted at ending their conservatorship and listing them in the markets as a unified entity, under the ticker name “MAGA.”
Fannie-Freddie Merger: A ‘Moral Hazard’
Schiff has been a vocal critic of Trump’s plans for a merger of Fannie Mae and Freddie Mac, saying that it could create a “moral hazard” greater than what existed prior to the financial crisis of 2008.
He said, such a merger could effectively create a monopoly in the U.S. mortgage market, one that he says can “leverage an explicit” government guarantee, turning “risky mortgages into U.S. Treasuries.”
He has also called Trump’s plan in this regard, “one of the worst economic decisions ever made by a U.S. president,” saying that the move could be disastrous.
Unlike Schiff, however, hedge fund manager Bill Ackman has backed Trump’s move, saying that “A merger would also reduce the cost and risks of government oversight, as there would be only one institution that would require FHFA oversight. I suspect that this is @realDonaldTrump's idea, as implied by his post below. It's a really good one.”
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