The Tale of Fannie and Freddie

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Karl Smith has read the just-released Conservator’s Report on Fannie and Freddie and has a detailed post summarizing it. His conclusion:

The wave of housing price increases was kicked off by changes in private label securitization. These changes left Fannie and Freddie with a smaller market share and lower absolute level of securitizations. Fannie and Freddie attempted to adjust their basic business practices to stay competitive in bubble markets and among aggressive borrowers.

These adjustment left Fannie and Freddie exposed to a large decline in housing prices. This is exactly what happened and Fannie and Freddie reaped enormous losses because of their exposure.

Had Fannie and Freddie stuck to their traditional role of guaranteeing low value traditional loans rather than trying to stay competitive in bubble areas their losses would have been substantially less.

In short, attempting to subsidize the American dream for low and moderate income families may be a fundamentally bad policy. However, it does not appear to be either the origin of the housing bubble or the source of Fannie and Freddie’s trouble.

Read the whole thing for the full story. Overall, it really does seem like the right take to me. Fannie and Freddie obviously made huge mistakes that are going to cost the taxpayers a boatload of money, but the evidence just doesn’t support the idea that they helped provoke the housing bubble. They were followers, not leaders. It was Wall Street that lit the fuse, not Fannie and Freddie.

TIME IS RUNNING OUT!

We have an ambitious $350,000 online fundraising goal this month and it's truly crunch time: About 15 percent of our yearly online giving usually comes in during the final week of the year, and in "No Cute Headlines or Manipulative BS," we explain why we simply can't afford to come up short right now.

The bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. And advertising or profit-driven ownership groups will never make time-intensive, in-depth reporting viable.

That's why donations big and small make up 74 percent of our budget this year. There is no backup to keep us going, no alternate revenue source, no secret benefactor. If readers don’t donate, we won’t be here. It's that simple.

And if you can help us out with a donation right now, all online gifts will be matched thanks to an incredibly generous matching gift pledge.

payment methods

TIME IS RUNNING OUT!

We have an ambitious $350,000 online fundraising goal this month and it's truly crunch time: About 15 percent of our yearly online giving usually comes in during the final week of the year, and in "No Cute Headlines or Manipulative BS," we explain why we simply can't afford to come up short right now.

The bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. And advertising or profit-driven ownership groups will never make time-intensive, in-depth reporting viable.

That's why donations big and small make up 74 percent of our budget this year. There is no backup to keep us going, no alternate revenue source, no secret benefactor. If readers don’t donate, we won’t be here. It's that simple.

And if you can help us out with a donation right now, all online gifts will be matched thanks to an incredibly generous matching gift pledge.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate