Comment on: “Phasing out the GSEs” by Vadim Elenev, Tim Landvoigt, and Stijn Van Nieuwerburgh

- Government Sponsored Enterprises sell underpriced mortgage guarantees.
- Guarantees were meant to stabilize lending, but a model suggests that they hurt welfare.
- Banks take on more risk due to the moral hazard from the underpriced guarantees.
- Probability of mortgage crises rises.
- Bailout obligations lead to more volatile fiscal policy and consumption.