Fratantoni emphasized the importance of retaining at least two government-sponsored enterprises (GSEs) to encourage competition in the secondary market. He noted that a merger might jeopardize the current balance of partnerships with primary markets. The Trump administration is considering merging GSEs and is seeking to sell 5% to 15% of them, valuing them at around $500 billion. Concerns over excessive risk from competition have been lessened through new regulations established after the 2008 financial crisis.
Fratantoni argued that competition in the secondary market is beneficial and emphasized that the system is as strong as it has ever been post-crisis.
Proponents claim merging the GSEs could improve efficiency but Fratantoni countered that post-crisis reforms have addressed excessive risk-taking concerns.
Fratantoni highlighted that the GSEs currently coordinate in low-value competition areas but their competition is valuable in other market segments.
The Trump administration aims to offer 5% to 15% of the GSEs' stock in a plan that could value them at approximately $500 billion.
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