Bethany McLean provides the definitive account of the Fanniefredderung

My old friend Bethany McLean, who was writing about Fannie Mae when writing about Fannie Mae wasn't cool (so was I, but far more superficially), has an epic dissection of "Fannie Mae's Last Stand" in the February Vanity Fair. It tries in places to be a typical personality-driven VF story, with former CEOs Jim Johnson and Frank Raines as the protagonists. But that never really takes—which is a good thing, because what Bethany has delivered instead is the fairest, most comprehensive examination I've seen of how Fannie and Freddie Mac got to be so powerful, how they landed in trouble, and how culpable they are for our current economic mess. As she writes near the end:

[A] few things are clear. One is that the argument that Fannie and Freddie caused our entire economic calamity is absurd. Yes, the volume of bad mortgages that Fannie and Freddie bought may have blown the bubble bigger than it otherwise would have been. But to put the blame entirely on Fannie and Freddie is to exempt all the other players, including the mortgage originators who sold subprime mortgages and Wall Street, which packaged up the bad mortgages and sold them to investors around the globe.

Another thing that's clear is that the critics were both right and very wrong about Fannie and Freddie. Yes, their executives and shareholders made fortunes in the glory years, and, yes, taxpayers are now bearing the brunt of whatever losses there are. Just as critics always warned, it's “the privatization of profits and the socialization of risks.” But what the critics missed is that that wasn't unique to Fannie and Freddie. It turns out our entire financial sector was operating under that same premise—and to a far greater degree than Fannie and Freddie.

Anyway, read it. It is really long. But this is a slow news week. You've got the time.