Fannie Mae and Freddie Mac, the "toxic twin" housing financing behemoths blamed for setting the world on fire, were not operating any differently than the entire financial sector, Bethany McLean writes in Vanity Fair. McLean documents Fannie Mae's history starting from conception in FDR's New Deal, when it was chartered by Congress to help homeownership (Freddie Mac followed in 1970), and ending in its failure to resist the profitable subprime game.
Evidence suggests that Fannie and Freddie were rashly seized, not because they had to be, but because they had many enemies in government, McLean argues. The seizure then scared a wave of companies into protecting themselves, deepening the crisis. McLean concludes that the government takeover has failed. "Fannie’s and Freddie’s cost of funds has shot higher, making it economically unfeasible for them to buy up a slew of mortgages," she writes.