Fannie / Freddie Still in Limbo
Folk wisdom tells us that the more painful a mistake the less likely we are to repeat it. This may be all good and well for dogs and flames but not when the wounds are abstract and politicians hover near the stove. Two years after government-sponsored enterprises Fannie Mae and Freddie Mac were put into conservatorship, taxpayers have been scorched to the tune of $150bn and counting.
With the money borrowed at record-low rates and the costs of winding them down deferred, not only is there an understandable lack of political will to confront the gargantuan issue the GSEs represent but even a push to perpetuate the policies that helped doom them. Just this week, their main regulator released fresh quotas for lending to low-income households while no-money-down mortgages have been resurrected.
Formalising the relationship by making Fannie and Freddie direct arms of the US government would raise official government borrowing by nearly $6,000bn and see spending balloon. Officially-sanctioned home ownership would then be in the awkward position of competing with military and social programmes in annual budgetary warfare.