Feds Seize Fannie and Freddie, in Multibillion Dollar Bailout

Over Sunday, the federal government took over the government-backed mortgage giants Fannie Mae and Freddie Mac, which were running out of money due to their massive investment in defaulting (and subprime) mortgage loans, and their unusually thin capitalization (Fannie and Freddie are capitalized much more thinly than private lenders are required to be, which enabled  their managers and shareholders to get rich off of high margins in good times, then stick the taxpayer with the tab in bad times, like now).

As their looming insolvency became blazingly obvious, even their long-time apologists, like Steven Pearlstein of the Washington Post, now admit that they were gambling with taxpayers money.  Changing his tune, Pearlstein now admits that “a good chunk of the responsibility should be assigned to elected politicians,” who “encouraged the jump into the subprime market by imposing more ambitious ‘affordable housing’ goals on the companies.”  Federal obsessions with “affordable housing” and “diversity” did indeed play an important role in causing the mortgage meltdown which now threatens our economy.

We earlier wrote about how Fannie Mae executives engaged in fraud and bullying on a grand scale.