Fannie and Freddie

What is going on right now with regard to the Federal government and the credit industry represents possibly the single greatest realignment of the role of government in private sector finance since the Great Depression.

I, for one, am terrified of what Congress is doing and what they aren’t doing. You won’t hear this story told in the mainstream press because, as my good friend Harriet points out, it’s complicated and doesn’t explain itself graphically. Furthermore, it’s not partisan so there is no natural protagonist/antagonist to root for.

The GSEs got into an enormous mess because their special status allowed them to take an unsafe chunk of the market, its executives were rewarded for risk-taking, and its management was excessively entangled with the government, which made it hard for them to say no when the regulators asked them to take on even more loans. Congress’s plan is . . . more of the same.

[From Megan McArdle (July 23, 2008) – Neither fish nor fowl nor good red herring]

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Read more on Freddie Mac, Fannie Mae at Wikinvest

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