Three years into the nationalization of housing finance by government-sponsored entities Fannie Mae, Freddie Mac and the Federal Housing Authority, it is time to start reducing their footprints. 

The expansion of agency debt not only imposes risk and realized losses on taxpayers, it also increases the cost of Treasury's direct financing, by creating a huge pool of alternate government-backed securities to compete with Treasury securities, and thus increases the interest cost to taxpayers.

The US housing finance market should function without any direct government financial support. It should also ensure mortgage quality, a stable budget for assistance to low-income families, and eliminate Fannie and Freddie.

We should aim in the long term for a housing finance sector which is principally a robust private market, and one in which you can be either a private company, or you can be a government agency, but you can't be both.

Why are some balance sheets better for certain assets than others? Well, some are less leveraged, some have longer-term funding, some have government favors and subsidies, and some may just be stuffees.

The Dodd-Frank Act needs significant amendment, so that it applies quality standards to FHA and other government agencies.

Comparing the American housing finance system to other countries makes clear that one thing remarkable and indeed unique in the world about American housing finance was the dominant and disproportionate role played by government-sponsored enterprises

A private secondary market for prime mortgages should have been a natural market development. Why did it never develop?