Critiquing Corker-Warner: Several columnists weighed in on the Corker-Warner bill, a bipartisan proposal that would, among other things, replace Fannie Mae and Freddie Mac with a federal "catastrophic" reinsurer and have private mortgage insurers take a first-loss position. Risk Doctor Clifford Rossi wondered whether the bill was actuarially fair from an insurance perspective. "It all comes down to the likelihood of realizing certain scenarios for credit losses over time and stipulating a threshold based on extremely rare events," he wrote. "The problem is that establishing the probability of an exceptionally bad event isn't all that easy, as we found during the mortgage meltdown."
Peter Wallison of the American Enterprise Institute argued the bill retained a fatal flaw of the GSE model. "We should recognize by now that insurance funds run by the government are not insurance in any meaningful sense," he argued. "The government does not effectively price for risk; it prices to confer political benefits, just as Congress delights in spending." One reader agreed with Wallison's assessment and added, "The Corker-Warner proposal is another in a long line of politically expedient interventions that actually deepens the government involvement beyond its predecessors."
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