Bailouts and Credit Cycles: Fannie, Freddie, and the Farm Credit System
Julie Andersen Hill
In September 2008, the United States government seized mortgage giants Fannie Mae and Freddie Mac. Since that time, the government has pumped $111 billion of new capital into these government-sponsored enterprises. Yet the future of these companies post-bailout is far from clear. As policymakers consider the future of Fannie and Freddie
, it is useful to remember that this is not the first significant bailout of a government-sponsored enterprise. The government also rescued the Farm Credit System in the 1980s. This Article examines the historical cycles in which Fannie, Freddie, and the Farm Credit System have funded loans: they fund more loans in good economic times but fund fewer loans in poor economic times. In other words, they fund loans pro-cyclically with business and credit cycles. By repeatedly providing bailouts, however, government officials demonstrate that they want these government-sponsored enterprises to fund loans in a countercyclical manner. This Article considers the advantages and disadvantages of three possible ways to induce countercyclical behavior. It concludes that policymakers should impose countercyclical capital requirements and create an insurance system funded with risk-based premiums to insure the companies’ bonds. It further concludes that, even with these measures, occasional government bailouts may be necessary to stimulate lending during severe economic downturns.
Tontines for the Invincibles: Enticing Low Risks into the Health-Insurance Pool with an Idea from Insurance History and Behavioral Economics
Tom Baker & Peter Siegelman
Over one-third of the uninsured adults in the U.S. below retirement age are between nineteen and twenty-nine years old. Young adults, especially men, often go without insurance, even when buying it is mandatory and sometimes even when it is a low-cost employment benefit. This Article proposes a new form of health insurance targeted at this group, the “young invincibles”—those
who (wrongly) believe that they do not need health insurance because they will not get sick. Our proposal offers a cash bonus to those who turn out to be right in their belief that they did not really need health insurance. The concept comes from the tontine life insurance that fueled the rise of the U.S. insurance industry in the late nineteenth century. A largely forgotten casualty of the 1906 “pacification” of the life-insurance industry, the tontine idea holds great promise for making health insurance attractive to the invincibles. The tontine feature frames the health insurance purchase as a smart investment, rather than a way to spend money for something the customer does not think he needs. Tontines make insurance more attractive to the uninsured, without wasting funds by subsidizing those who are already covered. We identify a particular class of individuals (the invincibles), show how a specific cognitive bias accounts for their irrational behavior, and design an insurance mechanism (tontines or deferred dividends) to overcome the effects of this bias. The final sections of the Article offer an empirically calibrated pricing demonstration for a tontine health policy and an analysis of the legality of tontines in this context.
The Right to Science and Culture
The Universal Declaration of Human Rights states: “Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.” This Article suggests how this text may offer a philosophical and legal basis to constrain the further expansion of protectionism in international IP law
Drawing on accepted methodologies of human rights interpretation
and recent research from legal and economic scholars on the value of preserving the knowledge commons, the Article offers a theory of “the right to science and culture” as requiring a public goods approach to knowledge innovation and diffusion. The Article then translates this public goods theory into concrete guidance for policy makers seeking to implement human rights obligations, and for jurists asked to adjudicate rights-based challenges to copyright and patent laws. In conclusion, this Article suggests that reviving attention to this long-marginalized provision of international public law may provide an important rhetorical and legal tool with which to open up new possibilities for sensible IP reform.
Riparian Landowners versus the Public: The Importance of Roads and Highways for Public Access to Wisconsin’s Navigable Waters
The lakes and rivers in Wisconsin are some of the State’s most valuable resources. The public has a right to use and enjoy these resources under the public trust doctrine. For those who are not lucky enough to own shorefront property, access to these resources is often provided through informal public-access sites created by a right-of-way extending to the banks of navigable waters
. Unfortunately, many of these public-access sites are lost when neighboring landowners seek to have the public-access site discontinued. Wisconsin has passed laws to ensure that the Department of Natural Resources oversees and protects vital public access. However, more is needed to protect these assets. This Comment suggests changes to the law to protect these valuable resources for future generations.