#05-35
Comments at the Wharton School Conference on "Fixing the Housing Finance System"
Edward Golding
Abstract: What is the low-cost efficient way of providing housing finance? In introductory economics we
learn that competitive firms with no government subsidies will through competition reach the
low-cost efficient outcome. But those theorems rarely hold for financial intermediaries. We
have learned that banks are “special” and that federal deposit insurance and a central bank are
acceptable government interventions. But would I argue that they are not the only acceptable
form of government intervention. Both theory and empirical evidence suggest that government
sponsored enterprises (“GSEs”) are an important supplement to the banking system. The
mortgage finance system is too important to be left to one set of institutions.
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