Join the Fool for a talk with Chris Mayer, who is the Paul Milstein Professor of Real Estate at Columbia Business School. Mayer is also a visiting scholar at the Federal Reserve Bank of New York, and the co-director of the Richard Paul Richman Center for Business, Law, and Public Policy. His research has delved into topics such as housing cycles, mortgage markets, debt securitization, and commercial real estate valuation.

No one, including Mayer, knows for sure what the government will do with Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) next, but he does have some news from D.C. on the Corker-Warner bill and how he would like to see the situation handled.

Full transcript below.

David Hanson: Before we started filming, you mentioned you were down in D.C. talking, I'm assuming, about GSE reform. I guess my questions would be, what do you think the government should do with Fannie Mae, Freddie Mac, and what do you think they actually will do with them?

Chris Mayer: Should do is easy for an economist to answer. Will do, even the best political scientists don't know the answer to that question.

The should do part: I think the Corker-Warner bill is a really good start on the legislative front. It fits the basic principles, which is it's a path for the U.S. government to withdraw its footprint and it's such that lenders who are in the market are going to bear some risk associated with the mortgages that they make.

To my mind, that's one of the big problems, is when you have a lender making a loan where they have no stake in the outcome... we know that the "Heads, I win, tails, taxpayers or somebody else loses" -- even if it's not taxpayers -- is not a very good lending model. To my mind, that's a really good approach to thinking about GSE reform.

Will it happen? At the panel today, Sens. Corker (R-Tenn.) and Tester (D-Mont.) both said, "Yes, we think there's a real shot at getting this out of the Senate, and even having the House pass something." But I'm no prognosticator. I certainly... betting on progress in D.C. strikes me as one of the more challenging kind of bets for anybody to make, especially an economist.

Hanson: We're an investment company, and there's been some investors out there -- Bruce Berkowitz, some retail investors -- that have come out and bought the preferred shares of Fannie and Freddie, and also the common... What do you say to those people? Do you think that's a reasonable bet, or do you see that as a straight-up gamble?

Mayer: Look, the U.S. government has all sorts of rules about how they can pull all the profits out of Fannie and Freddie.

This is really a bet that you're not going to see GSE reform that wipes them out, and -- and it's a big and -- also that the way conservatorship was set up was done in a way that was not going to pass muster, so their litigation is going to prevent the federal government from scraping all the profits and moving it back into the Treasury, so it's a two-pronged bet.

I'm not a lawyer. I have no view as to whether conservatorship was done in a way that would allow this to happen or not. The political process, frankly, I think most Americans do think Fannie and Freddie should be eliminated, so on that vote I know what the political pressure is.

But if the bet is that nothing will happen in D.C., there are many, many people who have done very well on the bet that, even if something should happen in D.C., that it actually won't. There's always a reasonable chance on that.