Sunday, January 11, 2009

Comments Wanted

This idea of Bradford DeLong's struck me as pretty interesting. Any economists out there - any comments or criticisms to offer?

My favorite idea right now is that of nationalizing Fannie Mae and Freddie Mac completely and unleashing them to buy up every single mortgage in the country at market rates. Their ability to borrow at the Treasury rate means that they should be able to make money by doing this. When they own mortgages they can renegotiate and refinance them all with the public interest in mind. And as they squeeze banks out of the mortgage business the fact that banks are looking for yield should push other financial asset prices up—and make it possible for those businesses that should be expanding to get financing right now on terms that make expansion profitable.

01/11 10:55 PM