Something has to give. Fannie Mae and Freddie Mac - America's colossal home mortgage securitizers - have been growing at about 11.5% per year. That's much faster than the market they serve: the underlying market for home mortgages in America is growing at only about 6% per year.
So, Fannie and Freddie are going run into a problem, not very far down the road. Peter Wallison, a resident fellow at the American Enterprise Institute, and Bert Ely, an American banking consultant, estimate that Fannie and Freddie are on track to assume the credit risk for almost half the residential mortgages in America by the end of 2003. And Fannie and Freddie will have acquired all the mortgages available within a short time after that.
"The question then will be how can Fannie and Freddie get out from under the government's thumb so that they can continue to grow," says Wallison. Fannie and Freddie, two government-sponsored enterprises (GSEs), will need new powers from Congress in order to branch out into other businesses before they run out of assets they are permitted to buy. Failing that, their growth will come to a screeching halt and their stock prices could plummet.