From Mr Derek Roper.

Sir, As John Kay recognises, Fannie Mae and Freddie Mac were originally state institutions devised during the New Deal “to enable low-income households to buy their homes” (“Fannie Mae and the limits of public obligation”, July 16). Their present troubles arise from the later decision to commercialise them by admitting private shareholders. Prof Kay is right to say that in terms of their original remit this should never have happened. This being so, I wonder why he describes their primary social purpose as “outdated” ? The adjective reflects the attitudes of 20 years ago, when capitalism seemed to have all the answers. Now it is once more in crisis, New Deal thinking again seems relevant and we may expect much more of it.

A not-for-profit, transparent, government-backed concern providing cheap mortgages to those in need would be doing a useful job, and have no incentives to parcel up its debts and hide them away from its balance sheet. Once house prices have settled, the UK government should develop Northern Rock on these lines.

Derek Roper,
Sheffield, South Yorks S10 5BW, UK