Libby Cantrill, head of public policy at PIMCO, argues that significant reform of the Government-Sponsored Enterprises (GSEs) and reducing the government's involvement in housing finance might actually be more straightforward while they're still under conservatorship. Concerns arise around the release of the GSEs, particularly related to the introduction of credit risk in mortgage-backed securities (MBS) markets, which could reduce liquidity. Panelists emphasize that any changes should be made carefully, considering potential impacts on federal responses to financial crises, including guaranteeing mortgage bonds.
"We question this fascination and obsession with releasing the GSEs in the first place because we don't understand what objectives it would actually achieve from a policymaker perspective."
"If the GSEs are released from conservatorship without an implicit or explicit guarantee from the federal government, it would introduce credit risk into the MBS market."
"There are a lot of good ideas on how we can move to other guarantee formats, but all of them carry degrees of complication and frankly some uncertainty."
"Releasing the GSEs could complicate the federal government's ability to act in the event of another systemic financial problem."
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