Fannie and Freddie: Time to become government agencies again?

Yes, you end up with executives like Franklin Raines who believed that the role of a CEO was to lobby Congress rather than run a business.

"But if it comes to that is there any way we can help pay for it by garnisheeing the investment income of all the ex-Fannie/Freddie execs who raked in zillion-dollar paychecks back when we were under the mistaken impression that the two companies were private enterprises?"

Don't forget the investment bank and hedge fund wunderkinds who engineered the entire credit crisis. There is enough blame to go around to lasso in a majority of Wall Street execs.

Don't forget that Fannie and Freddie are mandated by Congress to pick up loans and get involved in certain types of deals that are money losers from the moment they touch them (this isn't the whole problem but it is a huge problem). Either Congress should loosen its regulations and stop forcing them to do deals that lose money or have the government at least do a partial bailout with respect to the money-losing mandates. I don't like government bailouts, but when the government is part of the problem (creating serious market distortions), then it has some responsibility to be part of the solution.

In the end, I think the real solution is to have some functions of Freddie and Fannie become more private and other functions become more public, especially the affordable housing and general housing market backstop functions.

Remember the S&L bailout and the subsequent Keating 5 scandal? It's like a replay, all over again. Good times, good times.

These are not good times for Fannie or Freddie. We are only seeing the tip of the iceberg. I don't think most people realize what a huge player each of them is in the real estate and financial sectors of this country and how much trouble they are really in.

So BrooklynGurl, do you think that the government should backstop speculators in the real estate and fixed income markets?

OK, you dared me.

Dit toont volgens mij dat een volledige vrije markt niet de beste organisatie is. Als het misloopt betaalt de staat hoe dan ook, dus kan je best vanaf een passieve rol voor de overheid inplannen, die actief wordt in geval van crisis.

Flanders rules!

for non-dutch speaking Americans:
I feel this demonstrates the need to have some government protection of the market. In Belgium, or in Canada (two examples I happen to know) the government will play a role in the mortgage market. It will avoid excesses, and if things go wrong, the government ends up picking up the tab, but it also seems to do so in a fully "private" market.

Mooi zo!