Tett: Time for true debate on Fannie and Freddie

It remains to be seen whether any of this gets beyond political posturing. However, judging from a consultation exercise now being organised by the US Treasury, there are some interesting ideas floating around. These essentially fall into two camps. Parts of the Republican party – and some private sector banks – want to remove the state subsidy for the GSE altogether. One idea submitted to the Treasury, for example, calls for banks to organise a mutual, private sector insurance scheme to guarantee mortgages, without state support.

However, a second strand of ideas calls for the state subsidy to be maintained, both to ensure stability in the short term – and to guarantee that the mortgage market remains liquid and homogenous in the long term. Sifma, the banking lobby group, for example, says that it is crucial to maintain the so-called “to be announced” sector, to give the market depth...