Paulson’s Third Way: GSEs Taking Utility Role
By Steven Sloan and Emily Flitter
Since the government seized Fannie Mae and Freddie Mac in September, the debate over what to do next has focused on privatization or nationalization. But with less than two weeks remaining in office, Treasury Secretary Henry Paulson encouraged policymakers on Wednesday to consider a third option: replacing Fannie and Freddie with private-sector mortgage guarantors regulated like utility companies. His comments sparked a fierce debate about the future of the government-sponsored enterprises, with some arguing that Mr. Paulson’s suggestion is a quick and easy solution and others calling it impractical. “It is the easiest way out of the public-private conundrum,” said Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc.