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    Repiglican Roast

    A spirited discussion of public policy and current issues

    Name:
    Location: The mouth of being

    I'm furious about my squandered nation.

    Monday, July 14, 2008

    The $5 trillion mess created by Deregulation

    A fine example of how the right wing is willing to sacrifice the country's well being in order to fuck up government so they can then proclaim that government doesn't work.

    [...]

    The two companies are so-called government-sponsored enterprises, created by Congress in 1938 (Fannie) and 1970 (Freddie) to help more Americans buy houses.

    Their mandate is to maintain a market for mortgages - buying loans from banks, repackaging them as bonds, and selling those securities to investors with a guarantee that they will be paid.

    This makes lending more tempting for banks because Fannie and Freddie take on risks like missed payments, defaults and swings in interest rates.

    But the companies are also publicly traded, with the usual mandate of trying to maximize profits for shareholders.

    That effort, of course, involves risk, but as quasi-government programs, they've long carried an implicit guarantee that the feds wouldn't let them fail.

    Their hybrid nature created both the opportunity and the temptation for the enterprises to take on more risk and to make themselves ever larger, more important and thus more profitable players in the mortgage market.

    [...]

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