from article written by Adam levitin
Shielding consumers from housing finance risks is critical to economic stability. Consumer spending drives the economy, and home purchases are a large, undiversified investment for which there is no effective hedging strategy. A homeowner cannot hedge against home price decline on his home, and consumers, unlike financial institutions, cannot easily hedge interest rate risk.
Some members of Congress and the Treasury Department are contemplating privatizing the housing finance system. This is unfortunate because the private securitization market has never provided transparency of credit risk to investors and will not do so on its own.
As we examined in a study, the housing bubble and financial crisis stemmed from the private market’s oversupply of risky mortgage products through private securitization.
Read the full story here
Privatization of Housing Finance System Creates Risk - Room for Debate - NYTimes.com
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