Fundamental Questions About the Future of Housing Finance
In the late 1980s, Freddie Mac challenged fundamental assumptions about its public mission when it purchased tobacco stock to enrich its portfolio and, shortly thereafter, briefly obtained a statutory change eliminating the private mortgage insurance industry. Combined with Fannie Mae’s increasing flights into high finance, this persuaded Congress in 1992 to create the Office of Federal Housing Enterprise Oversight, which at least pretended to regulate the GSEs, and to mandate an affordable-housing mission, which pretended to force Fannie and Freddie back to the public purpose on which their privileges rested. Despite sweeping safety-and-soundness reforms in 2008, there matters largely rested until Sandra Thompson took over the Federal Housing Finance Agency this June
