"If effective regulatory reform legislation ... is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole," the senators wrote in a letter that proved prescient. Full Story »
Posted by Chris Finnie
This is another report on the tortured recent history of Freddie Mac and Fannie Mae -- Democrats lining up to protect loans to low and moderate income families, Republicans fighting with Republicans over regulation and a changing of the political orientation of Freddie Mac management. This report has many sources but almost all of them anonymous (for fear of retribution?). Moreover, the writing does little to make this confusing situation clearer. Nevertheless, this report is valuable in disclosing yet another facet of the mess we're in.
Neither political party comes off looking particularly good with regard to Fannie Mae and Freddie Mac. Democrats let their championing of moderate and low income borrowers cloud their view while the go-go and the fiscally responsible wings of the Republican party (not as concerned about the plight of the borrowers)fought with each other. In spite of the mess at the two government chartered companies, analysis of borrowing shows that the two companies played a minor role in the subprime mortgage market which was dominated by and then securitized by independent organizations looking to make a buck. All of this occurred against the backdrop of the decades long trend of freeing up markets to regulate themselves. I have concluded that most of us involved in chasing our ideologies have discounted the pervasive effect of greed on our institutions and in subverting our best intentions..