Fisher Center for Real Estate and Urban Economics

This paper offers a framework and a specific proposal for the re-regulation of the US investment banks and government sponsored enterprises (GSEs, Fannie Mae and Freddie Mac) in the aftermath of the subprime mortgage crisis. The paper starts with a review of the key factors that led to the subprime crisis firms. It then looks at the special features of the investment banks and GSEs that led to their bailout. Finally, the paper proposes a special solution to avoid future bailouts.