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December 2, 2008 8:11:11 PM CST

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Fannie/Freddie Rescue Not Radical Enough

Posted Sep 9, 08 11:33 AM CDT in Politics,  Business,  Opinion 

(Newser) – The Treasury’s rescue plan for Fannie Mae and Freddie Mac may be “superbly crafted,” Steven Rattner writes in the Washington Post, but it won’t solve the government-sponsored entities’ problems. Continuing as private-sector enterprises is a setup that “simply doesn’t work.” The GSEs had every incentive to abuse their government backing to profit private shareholders—and they did.

Now, the government should take whole ownership of the GSEs and return them to their narrow original purpose: providing liquidity for the mortgage market. Once stable, this new government body could sell off Fannie and Freddie’s assets, repaying first the companies’ debt, and then the shareholders. And then we’ll have to ask ourselves the biggest question: How much help should the government give housing?

Source Washington Post

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"We should consider setting up a new government entity," Steven Rattner writes. "Responsibility for providing liquidity to the mortgage market would be transferred to this new entity."   (AP Photo)
The front door of a home that was foreclosed on is marked with a message Monday, Sept. 8, 2008, in Salt Lake City.   (AP Photo/Douglas C. Pizac)
Graphic explains how Fannie Mae and Freddie Mac buy and finance mortgages, including details on Treasury's plan.   (AP Photo)
Treasury Secretary Henry Paulson speaks during a news conference Sept. 7, 2008, on the bailout of mortgage giants Fannie Mae and Freddie Mac.   (AP Photo)
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Financial Crisis • Henry Paulson • Fannie Mae • Freddie Mac • Treasury Department • Steve Rattner


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