Monday, July 21, 2008

Fannie and Freddie get a lifeline

Here's a link to the Register's editorial on the decision to give Fannie Mae and Freddie Mac, the two giant "government-sponsored enterprises" that dominate the secondary mortgage market and are in trouble because of the increasing number of defaults during the housing downturn/ bubble-burst/whatever, the key to the Fed's discount window. I know the hope was that simply making it available would halt the stock price downturn and it wouldn't have to be used, but . . . As Peter Wallison of AEI, who was recommended to me by several people as one of the more knowledgeable people who keeps an eye on this part of the economy, the two are neither private fish nor government fowl. It's never been explicit but always implicit that the government wouldn't let them fail. Now that it's fairly explicit, the taxpayers could be on the hook big-time. The $150 billion to make depositors whole during the 1980s S&L crisis might start to look like chump change.

No comments: