"In his blog, posted on Thursday, Broeksmit warned that a Fannie-Freddie merger would harm competition and increase risks in the U.S. housing finance system, noting that a similar idea was put forward by the National Economic Council in September 2016 and received careful review across the industry before ultimately being rejected. Competition between Fannie Mae and Freddie Mac has been central to their success in providing liquidity and stability to the mortgage market, Broeksmit wrote."
"Creating a government-conferred monopoly would diminish innovation, degrade service to market participants, and heighten systemic risk by concentrating housing finance operations within a single entity. Broeksmit said the competition between Fannie and Freddie that exists today drives a range of benefits for lenders and borrowers, including technological development, risk-sharing in multifamily financing, specialized market expertise and product innovation that expands access to credit."
A merger of Fannie Mae and Freddie Mac would harm competition and increase risks in the U.S. housing finance system. Competition between the two government-sponsored enterprises provides liquidity and stability to the mortgage market and drives technological development, risk-sharing in multifamily financing, specialized market expertise, and product innovation that expands access to credit. Creating a government-conferred monopoly would diminish innovation, degrade service to lenders and borrowers, and concentrate operations, heightening systemic risk. Conservatorship has constrained the GSEs’ ability to compete and innovate and was never intended to be permanent. Alignment on standards can improve efficiency without eliminating competitive incentives.
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