Joe Nocera of the NYT exposes the scam conducted by Fanny and Freddie whose officers were warned off sub prime loans in good time but chose to continue buying them since they assumed correctly that they would be bailed out if they failed, and since CEO's multi million dollar salaries were unaffected if not enlarged. Repeatedly in public testimony they cynically used the excuse of their alleged mission to maintain low cost housing loans as a cover for their reckless malfeasance.
Are they really too big to fail or is it simply a case (surprise surprise) of the Bush administration protecting Wall St and hedge funds and other investors?
New York Times
August 23, 2008
A Mission Goes Off Course
By JOE NOCERA
Whenever the mortgage finance giants, Fannie Mae and Freddie Mac, find themselves in a tough spot — and boy, are they in a tough spot now! — they always seem to find a way to blame their problems on “the mission.” “We exist to expand affordable housing,” says Fannie Mae on its Web site, and although it also lists its other mission — providing liquidity for the American housing market — it is the former that has long been the companies’ trump card.
That mission of creating affordable housing is the reason that Alan Greenspan, the former Federal Reserve chairman, could testify, year after year, that Fannie and Freddie had become so large, and took so much risk, that they could one day damage the nation’s financial system — only to be utterly ignored by the same members of Congress who otherwise hung on his every word.
The mission is why Representative Barney Frank, the powerful, and usually clear-eyed, chairman of the House Financial Services Committee, will defend Fannie and Freddie even now, when their misdeeds are so clear. The mission is why the two companies were able to run roughshod over their regulator for years, and why the Bush administration was unable to rein them in, even after an accounting scandal.