Too Small to Fail

Foreclosures: What are Fannie and Freddie Doing to Stem the Tide?

On September 7, Fannie Mae and Freddie Mac were placed into conservatorship. There was an expectation that the move would make the companies, which had hunkered down to preserve capital, much more active in dealing with the on-going housing crisis. What has actually happened, and what are the prospects for the future? On November 13th, the Asset Building Program hosted a panel of experts featuring James Lockhart -- Director and Chairman of the Oversight Board of the Federal Housing Finance Agency, regulator of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks -- that discussed these and other questions relating to the conservatorship. Also featured were Barry Zigas of the Consumer Federation of America and Gregory Baer of Bank of America. The event was moderated by Ellen Seidman, Financial Services Policy Director in the Asset Building Program at the New America Foundation. Video of the entire event is available here.

Below is a brief discussion between James Lockhart and Ellen Seidman on the conservatorship of Fannie and Freddie.

A new approach to the way we write the rules for buying homes, getting credit cards and managing our finances is needed, one based on real-world human behavior, not just economic theory. Regulations governing these transactions can play an extremely constructive role if they are better attuned to both consumers' and producers' behavior, incentives and self-interest. On October 17, the Asset Building Program published a seminal paper and on this timely topic by Professors Michael Barr of the University of Michigan Law School, Sendhil Mullainathan of Harvard University, and Eldar Shafir of Princeton University entitled Behaviorally Informed Financial Services Regulation.

Using the tools of behavioral economics, Professors Barr, Mullainathan and Shafir-- three of the nation's leaders in this field-- propose that regulators should pay attention to both the "rules of the game"--what a provider must do or say, and the "scoring"-the reward or penalty arising from obeying or ignoring the rules. Based on this novel framework, the authors propose ten innovative ideas for regulating mortgages, credit cards and bank accounts for saving.

Also on October 17th, Professors Barr and Shafir, as well as Alex Pollock of the American Enterprise Institute and Travis Plunkett of Consumer Federation of America, gave a lively discussion on these topics, moderated by David Wessel of the Wall Street Journal. To watch the video of the event, click here.

Below is a short interview between Ellen Seidman and Professors Barr and Shafir:

Senator Menendez (D-NJ) Introduces Saver's Bonus Act

The Saver's Bonus Act was introduced on July 31st by Senator Robert Menendez. By providing a match at tax time for savings, the Saver's Bonus simplifies and eases eligible families' ability to save and build wealth through a number of short- middle- and long-term savings products. For more information about the Saver's Bonus, click here.

The Assets Agenda

The newest edition of New America's Assets Agenda outlines a federal public policy agenda to broaden savings and asset ownership opportunities for lower-income Americans who have limited resources at their disposal. This edition is the most comprehensive to date, with 84 innovative asset-building ideas. To read this paper, click here.