The former regulator of Fannie Mae and Freddie Mac said nationalizing the troubled GSEs is a bad idea, declaring that all government insurance programs are slated to fail.
Speaking at ASR's sister publication National Mortgage News conference on distressed assets, James Lockhart said the "right answer" to the Fannie/Freddie conundrum is to privatize the two, but admitted accomplishing such a task is near impossible right now since the government controls nearly 100% of the residential market and 80% of the multifamily sector.
Lockhart, who left the Federal Housing Finance Agency about a year ago, suggested breaking up the GSEs into two separate companies, but not on a good bank/bad bank model, but what he called a new company/old company model.
He noted that Democrats in Congress were correct in not including the resolution of the GSEs in the financial services regulatory reform bill. Lockhart said it would have made negotiations "messier" and that it's smarter to wait for a "calmer day." The two have been in conservatorship since September 2008.
