Fannie Mae and Freddie Mac: The ugly twins of finance

Posted: April 11, 2014 in economy
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Leviathan of last resort

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Fannie Mae and Freddie Mac


America’s huge mortgage-market distortions seem likely to endure

YOU could argue that Fannie Mae and Freddie Mac, two “government-sponsored enterprises” (GSEs) in the mortgage business which received the biggest bail-out of the financial crisis, have paid their debt to society. At any rate, the revenues they have generated for American taxpayers since the Treasury took charge of them in 2008 now exceed the $187 billion spent to rescue them. It might be a logical time for the government to stop underwriting Americans’ personal loans. Yet the thrust of the bill to reform their status that is gaining some momentum in Congress is the opposite. For an example of how a post-crash crutch becomes a permanent financial distortion, look no further.
Federal support for mortgages started as part of the New Deal, in 1934. The Federal National Mortgage Association, or “Fannie Mae”, was made private in 1968, and was joined by a twin, the Federal Home Loan Mortgage …

via Economic Crisis


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