The U.S. economy - and by extension, the global financial system - has a lot riding on Fannie and Freddie. They cannot fail, yet that is precisely what these mortgage giants are guaranteed to do. How can we limit the damage and avoid making the same mistakes in the future? Guaranteed to Fail explains how poorly designed government guarantees for Fannie Mae and Freddie Mac led to the debacle of mortgage finance in the United States, weighs different reform proposals, and provides sensible, practical recommendations. Despite repeated calls for tougher action, Washington has expanded the scope of its guarantees to Fannie and Freddie, fuelling more and more housing and mortgages all across the economy. This book unravels the dizzyingly immense, highly interconnected businesses of Fannie and Freddie. It proposes a unique model of reform that emphasizes public-private partnership, one that can serve as a blueprint for better organizing and managing government-sponsored enterprises like Fannie Mae and Freddie Mac. In doing so, Guaranteed to Fail strikes a cautionary note about excessive government intervention in markets.
It is a note that is as relevant in India and this special edition includes a chapter on government- sponsored enterprises which, in the light of what happened to UTI's flagship scheme US-64, shows the possible repercussions of such interventions.
iral V. Acharya, Matthew Richardson, Stijn Van Nieuwerburgh, and Lawrence J. White are professors at the Leonard N. Stern School of Business at New York University, and are experts in applied financial economics. Acharya and Richardson are the co-editors of Restoring Financial Stability and Regulating Wall Street. Van Nieuwerburgh is an expert on household finance and mortgage markets. White has studied government-sponsored enterprises for many years and has served on the board of Freddie Mac from 1986 to 1989 as part of his government service as a board member on the Federal Home Loan Bank Board.