Gross warns mortgage privatisation could 'cripple' US recovery

The veteran bond investor says mortgage yields could rise as much as 4% if housing agencies such as Freddie Mac and Fannie Mae are put into private hands, stalling the recovery. "Ninety-five percent of existing mortgage creation over the past 12 months were government-guaranteed. The private market was nowhere to be found because they charged too much," he says. "Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending. "The cost would be enormous in terms of yields - 300-400bp highe...