Economists Donald Marron and Philip Swagel, recently published a new proposal for the future of Fannie Mae and Freddie Mac, the two mortgage finance giants that were placed into government conservatorship in 2008 during the housing market collapse. Under their plan, the GSEs would become private companies that buy conforming mortgages and bundle them into securities that are eligible for government backing, but would not have the investment portfolios that were the main source of risk under the previous structure. To compensate taxpayers for taking on housing risk, Fannie and Freddie would pay a fee to the government in return for the guarantee, and the shareholders of the firms would take losses before the government guarantee kicks in. Other private firms — such as bank subsidiaries — would be allowed to compete by securitizing conforming loans and purchasing the government guarantee. Read More…