Wednesday, August 5, 2009

The WaPo burries the lede on a story about Fannie and Freddie

Talk about burying the lede – here're the last two paragraphs of a Washington Post story about the federal government doing some bureaucratic shuffling with Fannie and Freddie:

The administration's discussions on the future of the companies began in earnest earlier this year during the regulatory reform planning process and are just entering a more serious phase now. National Economic Council director Lawrence Summers has long wanted to overhaul the structure of the companies and warned as far back as the late 1990s that Fannie Mae and Freddie Mac posed a threat to the financial system.

I'm embarrassed to say this, but I didn't realize how good of an understanding Larry Summers (and Tim Geithner, for that matter) had of the causes of the financial crisis (check out this liberal Fox Business Channel commentator's critique of him). It's sad that someone with such a good understanding of economics before he was vested with so much power can so easily fall into the trap of supporting interventions that in a past life he might have known were a bad idea.

But here's the real kicker:

The government seized the firms last fall as the financial crisis worsened and has since used them to help reduce interest rates on mortgages generally and to assist borrowers who are at risk of losing their homes.

I wish the Post would make clearly that Summers' fear back in the late '90s was exactly that Fannie and Freddie's were doing too much of exactly that – reducing interest rates on mortgages.

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