GSEs (Fannie/Freddie),FHA&HUD

Did Fannie Mae and Freddie Mac Cause the Financial Crisis and How Can They Be Reformed?

Posted on Friday, March 18, 2011

The financial crisis has been blamed on many factors: Wall Street bankers, out of control hedge fund managers, incompetent ratings agencies, weak government oversight and a collapse in the housing mortgage markets. Seemingly all of these forces played a role. Peter Wallison of the American Enterprise Institute argues, controversially, that the main culprits in the financial crisis were the government-sponsored enterprises Fannie Mae and Freddie Mac. These mortgage-lending powerhouses, backed by taxpayer funds and a mandate from Congress to increase home ownership, even by people with low credit ratings, shoulder most of the blame for the economic meltdown according to Wallison. Unless they are reformed and reined in, Wallison writes, American taxpayers could well find themselves spending billions to bail them out again.

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