In the absence of Fannie, Freddie, and regulation, the market would likely produce mostly short-duration (e.g., 5-year) loans, or longer-duration loans paired with higher down payments, and that outcome would work fine; longer-duration loans would simply require well-capitalized banks to issue long-term bonds and hold more capital, raising rates modestly and giving borrowers an incentive to share interest-rate risk.
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Speaker
Arnold KlingEvidence Quote
“I expect we would see 5-year loans some kind of short duration loans or if there were longer duration loans they'd have relatively high down payments and that would be fine”
Created: 6/13/2026, 7:04:06 PM
My Notes
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