The fundamental problem is that GSEs are private companies with a public mission - a very difficult construct to balance. Unless GSE activities are constrained by appropriate legislation and strong regulation, their predominant motives will always be to reward their stockholders at the expense of taxpayers and consumers.

How does GSE domination of the conventional conforming market and their efforts to expand beyond charter limits into an array of new businesses affect consumers?

Evidence that the GSEs are attempting to build dominant platforms from which to control the mortgage finance system include:

• programs in which the GSEs select only those business partners who will not challenge their future growth and product ventures. While every company has the right to pick its partners, the fact that the GSEs enjoy an array of taxpayer-backed benefits means that this process of picking winners and losers selectively transfers government benefits and distorts the efficient functioning of the private market;
  
  
• development of automated underwriting (AU) systems through which lenders are encouraged to run all of their loans, not just the ones they wish the GSEs to purchase. Indeed, the GSEs are using their AU platforms to score many mortgages not intended for them, making it clear that control of the entire market platform is their goal; and
  
  
• entry over time into a range of ancillary mortgage and financial services, with the entrance of the dominant provider eventually squeezing out private competitors and limiting consumer choice.