Economists worry. It goes with the territory. If they're not concerned that monetary policy will destroy the economy, then they're fearful that politicians are going overboard with their additions to federal discretionary spending.

But in the latest monthly survey of its members by the National Association of Business Economists, their chief anxiety isn't any of those things. It's that the subsidies granted to housing-related government-sponsored enterprises like Fannie Mae and Freddie Mac pose undue risk to the nation's credit markets.

Fannie Mae and Freddie Mac are government-chartered institutions which keep money flowing to mortgages by purchasing loans from local lenders and packaging them into securities for sale to investors worldwide.

Because of their government connections, they don't pay federal income taxes and are exempt from paying Securities and Exchange Commission filing fees. But most importantly, investors look at them as can't-fail companies that are backed by the full faith and credit of the United States.

Fannie and Freddie say that isn't true; that there is no government guarantee. Nevertheless, investors are so sure Uncle Sam will bail them out if necessary that they are willing to park their money in the safety of housing finance at a somewhat lower return. And as a result, the borrowing costs of the two quasi-government agencies are somewhat lower than those of totally private companies.

The House Banking Committee, some U.S. Treasury officials, and the Federal Reserve have raised questions about the role of these ongoing subsidies. And now NABE panelists have joined in.

Some 60 percent of the business economists queried worry that the subsidies pose a risk to the current economic expansion. That's more than the 27 percent who believe a labor shortage and poor education pose a problem to the economy. Or the 22 percent who dread the stock market bubble will burst.

NABE panelists also questioned the continued role of the government in the home loan market. Nearly 38 percent of our respondents thought the subsidies should be eliminated entirely.

A further 28 percent thought the subsidies should be continued, but the enterprises should be restricted from entering into new markets.

About 20 percent thought current policy should remain unchanged, while 9 percent were in favor of expanding the role of the enterprises to cover more low-income housing.

Would curtailing the role of the GSEs hurt the housing market, as Fannie Mae and Freddie Mac have claimed?

A slight majority (53 percent) thought not. They either believed that the market would adjust or that housing no longer needed a subsidy. Just over 42 percent thought either housing prices would go up or mortgage market liquidity would go down or both if GSEs were reined in.

Published: August 24, 2000

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.