| Today, credit risk is anathema. By shouldering it, Fannie and Freddie are propping up the housing market. The banks that make the mortgages don't want credit risk, and neither do investors. Indeed, William Gross, co-founder and managing director of the investment firm Pimco, has said his funds wouldn't buy pools of so-called private label mortgages unless the homeowners involved had made a down payment of at least 30 percent. The proposed Fannie-Freddie reform that has gotten the most traction recently calls for new private-sector entities that would continue to provide credit guarantees on mortgages. These guarantees would not be entirely private, however, because they would be explicitly backed by the full faith and credit of the US government. |
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