Should we blame the GSEs?

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Should we blame the GSEs?


The US Securities and Exchange Commission have brought fraud charges against top executives at Fannie Mae and Freddie Mac

American Enterprise Institute economist Peter Wallison blames Fannie Mae for the financial crisis. He claims that NINJA loans and the collapse of lending standards, were caused by the government’s desire to extend home ownership into poorer communities, aided and abetted by the two privately owned, publicly backed government sponsored enterprises (GSEs).  According to Tea Party supporters “government entities like Fannie Mae and Freddie Mac occupied the epicenter of the housing bubble crisis.” The US Securities and Exchange Commission (SEC) seems to agree. Last Friday, the usually cautious organization brought fraud charges against six top executives at Fannie Mae and Freddie Mac, accusing them of understating their exposure to subprime mortgages to potential investors.

Fannie Mae was originally just a government agency whose task was to stimulate home ownership. Created during the

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  1. December 20, 2011


    No. The financial system is fundamentally broken. If it were not real estate, it would have been something else. Any malfeasance within Fannie and Freddie is a symptom, not a cause.

  2. December 22, 2011

    Roger Stanyard

    The Fannie Mae/Mac argument of the Teabaggers is spurious. The same problem of reckless dabbling in mortages occurred in countries without such institutions. The Republic of Ireland and the UK spring to mind.

    Worse still, reckless bank behaviour has occurred in Italy where there has been no reckless betting on mortgages or a property bubble.

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Tom Streithorst

Tom Streithorst
Tom Streithorst is a cameraman and journalist 

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