Sheldon Richman today has this excellent summary of the Freddie and Fannie fiasco. A couple choice slivers:
"The key to understanding the saga of Fannie Mae and Freddie Mac — the newly nationalized twin government-sponsored enterprises (GSEs) that dominate home financing — is this:
They were created — intentionally — to distort the housing and mortgage markets. That is, government planners were not content to let voluntary exchange and spontaneous market forces configure those industries unmolested. So — holding the taxpayers hostage — they intervened."
As always, government intervention begets more intervention:
"The bailout will begin with a billion-dollar infusion. Then the government will start buying shaky Freddie- or Fannie-backed mortgage securities in the marketplace. A $5 billion purchase will get things going, but up to $200 billion has been promised. It will no doubt be more.
Where will this money come from: taxation, borrowing, or the printing press? What will that will do to our economic well-being?
The government also acquired the authority to buy as much as 80 percent of the common stock at under a dollar per share. Nationalization is the right word."