Magazine article American Banker

Weekly Wrap: Merging the GSEs; Does Choke Point Hurt the Unbanked?

Magazine article American Banker

Weekly Wrap: Merging the GSEs; Does Choke Point Hurt the Unbanked?

Article excerpt

Paging Frannie McMae: Meaningful reform of Fannie Mae and Freddie Mac seems a ways off, so we might as well merge the two and save some money in the meantime, argues attorney Stephen A. Blumenthal, a former acting director of the agencies' old regulator, the Office of Federal Housing Enterprise Oversight. Combining the government-sponsored enterprises "would be a logical extension of the current [Federal Housing Finance Agency] program that seeks to make the enterprises more efficient by eliminating their duplication of efforts," he writes. Readers are on board with the plan. "Wasn't the only reason for the formation of Freddie to create the appearance of 'competition' for Fannie so there would not appear to be a monopoly back in the 30's?" writes commenter jonb. "Now that the GSE concept is so integrated into the mortgage process, what difference does it make any more?" Another reader, markfromkansas, suggested combining all the federal home loan programs, including those for veterans and rural areas, under one umbrella. "Even if we can't do that, can we at least give them all the same credit standards? The logic of a given factor being good enough for one federal program but not another escapes me," he writes.

Choke Point Target: Critics of Operation Choke Point often argue that the Department of Justice's program unfairly targets law-abiding companies in controversial but lawful industries like payday lending and arms dealing. William Isaac, a former chairman of the Federal Deposit Insurance Corp., says that Choke Point also harms the working-class people who patronize payday lenders, check cashers and other alternative financial service providers. "Eliminating these businesses will not do consumers any favors," he writes. "States that eliminate payday loans immediately experience a substantial rise in costly outcomes to consumers, according to research at the Federal Reserve Bank of New York and Kansas City Fed. …

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