A second option would be to give private entities sole authority to securitize pools of conforming mortgages – similar to what is now done with jumbo mortgages. If the Congress was disposed to provide some favor to housing, a federal guarantee could be given to certain securities backed by mortgages meeting strict conforming loan standards.
However, such favored status should be based on some limiting factor, such as need or special purpose. Either of these two options would address many of the problems associated with Fannie and Freddie in this crisis and would create a more transparent and competitive marketplace.