Fed Series: Housing Incentives Wrong #656-2
July 29, 2014No Comments
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This is Segment 4 of 6. Economist Allan H. Meltzer, Ph.D., charges that Fannie Mae and Freddie Mac fostered the wrong incentives that led to the home foreclosure situation. He points out public’s interest takes back seat to the Securities and Exchange Commission (SEC) training that undermine regulators’ objectivity. and promotes impractical, harmful, policies. Meltzer believes that changing incentives for those who are regulated, paying for their mistakes, such as insisting they hold 15% equity capital and requiring non-payment of dividends and bonuses if it drops to 10% is a huge incentive for change.