Friday, September 5, 2008

Federal government to nationalize mortgage industry

Well, just about. Apparently Washington is about to take over Fannie Mae and Freddie Mac. Together, the two semi-governmental mortgage giants have "backed 70 percent of new mortgages in recent months," and they were huge players in the nonsense that collapsed during the sub-prime mortgage crisis. I wrote about this irony a few months ago: though the crisis is usually blamed on overzealous investors wanting ever-more risky assets in search of the almight dollar, the truth is that Fannie Mae and Freddie Mac – "corporations" that have to face pressure from Washington, and are used as much to socially engineer and legislate as they are to seek profits and make market-worthy loans – had a large part in the explosion of subprime lending prior to the crash. And now, in the wake of it all, rather than cutting the cord, realizing that it was the government's fault, and leaving the mortgage giants to make loans they see as most profitable, the government is just formally doing what it had promised to do all along: nationalize Freddie and Fannie. And through that, it seems, most of the mortgage industry.

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