In short, the Corker-Warner plan to privatize Fannie and Freddie is essentially a proposal to reinstitute the structure of incentives that gave us the housing bubble and the financial crisis, this time with the added fuel of an explicit government guarantee on subprime MBSs. If that sounds like a stupid idea, you obviously haven’t spent enough time being convinced by lobbyists at one of Washington’s finest restaurants. . . . Even though mortgages with just 5 percent down are four times as likely to default as mortgages with 20 percent or more down, securitizers will not be required to keep any stake in them when they put them into an MBS. . . . Certainly the Justice Department’s treatment of the bankers who packaged fraudulent mortgages and misrepresented their quality to buyers will not discourage the same behavior in the future. None of these people went to jail, and in most cases they are much richer today than they would have been if they had pursued an honest career.
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