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The Giant GSE Risk Turkey: The Future of Freddie and Fannie

Alex Pollock on what to do with the Congressionally-mandated GSEs, Freddie and Fannie:

It’s a perfect time to think about the fundamental restructuring of the world famous, now broke, Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac.

Last summer, as we could all observe, the giant GSE risk turkey, weighing in at $5 trillion, came to roost in the dome of the U.S. Capitol.  Like Edgar Allan Poe’s celebrated raven, it won’t go away.  It roosts there, so the elected representatives of the people can’t forget the mistakes they made in fattening it up.

But while Poe’s raven croaked “Nevermore,” does the GSE risk turkey gobble “Evermore”?  Is this risk a permanent burden on the public finances?  Should it be?  My answer is No.

 

posted on 23 February 2009 by skirchner in Economics, Financial Markets

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