U.S. Must Avert Fannie-Freddie Failure, Survey Shows

By Christopher Anstey

Aug. 25 (Bloomberg) -- The U.S. government must avert any failure of Fannie Mae or Freddie Mac, the two largest sources of American mortgage financing, business economists said in a survey.

``Fully 75 percent agreed that these institutions are `too important to fail,''' the National Association for Business Economics, based in Washington, said in its semiannual economic policy poll. Just 20 percent of the panel of 278 NABE members said that any public aid for Fannie Mae and Freddie Mac ``would necessarily amount to nationalization.''

Fannie Mae Chief Economist Douglas Duncan was one of four analysts who ``conducted the analysis for this report,'' NABE said.

Legislation that President George W. Bush signed into law July 30 that provides as much as $300 billion refinance distressed mortgages won't hasten a recovery in the housing market, two-thirds of the respondents said in the survey. Subprime defaults were cited as the biggest short-term risk to the economy, followed by energy prices, the survey showed.

Fifty-five percent of the survey participants said the Federal Reserve's policy response to the slowdown is ``about right,'' up from 48 percent polled in March. The economists were evenly divided among those who forecast an increase in interest rates in the next six months and those anticipating no change, according to the survey.

To contact the reporter on this story: Chris Anstey at canstey@bloomberg.net