Would a “Cammie Mae” housing agency work in the UK?

British government is about to bet on home-buying support programs: it will throw 3.5 billion pounds ($5.3 billion) and guarantee up to 130 billion pounds of mortgages with 5% down payments over three years, British Chancellor George Osborne announced. A decision that has shocked a lot of people.

Is Britain about to follow the same housing subsidies pattern as the US with federal agencies Fannie Mae and Freddie Mac?, some analysts wonder. Would that work on the other side of the Atlantic?

Famous TV reporter Faisal Islam tweeted on Wednesday:

Has Osborne has just invented a British version of Freddie Mac, Fannie Mae….?
#CammieMae (a pun mixing Cameron and Fannie)

By the end of the nineties almost 97% of mortgages in the US were backed by the government. When the real state crashed, both were badly hit. Some members of Congress blame them for the financial crisis in the first place. These public institutions eased home buying to a level that ended up inflating the bubble that burst in 2007. They had to be bailed out in 2008 and have cost taxpayers $137bn. Others highlight their role in the recovery since then, and compare that cost to the almost 800,000 million of just the first program to bailed the big banks (TARP).

And we are almost back to the nineties: Fannie, Freddie and other federal agencies are now responsible for 90 percent of all new housing loans right now. President Obama is facing increased pressure to act and push to create a new home-financing system that’s influenced more by the private sector. Recently, Republicans and Democrats on the House Financial Services Committee agreed that it was time to replace Fannie and Freddie. However, due to the political gridlock in Washington, any reforms in housing finance may not pass in the near term.

The institution that Cameron is thinking of establishing will improve the housing market and therefore the economy. But it comes with a risk. The risk of a bubble.