Paulson’s big Fannie-Freddie gamble
Will the federal takeover of the mortgage giants save the economy?
The details of the U.S. government takeover of mortgage giants Fannie Mae and Freddie Mac are complex, said Steven Pearlstein in The Washington Post, but “the rationale is quite simple: to restore some semblance of normalcy to the housing market.” That’s the bet that Treasury Secretary Henry Paulson is making in wresting control of the two public-private hybrid firms and “permanently changing the landscape of housing finance in America.”
It’s impossible to say how much Paulson’s bet will cost taxpayers, said Peter Coy and Theo Francis in BusinessWeek.com. Initially, it could be up to $200 billion, but if the housing market rebounds, it could cost taxpayers little or nothing. Either way, nationalizing the two giants is “a dramatic move” for a free-market conservative government.
Yes, it’s “the largest nationalization in U.S. history,” said Evan Newmark in The Wall Street Journal’s Mean Street blog, but “Paulson has cut a good deal for the taxpayer and the economy will be much the better for it.” Fannie and Freddie shareholders lose big, but taxpayers, debt holders, and mortgage applicants should come out ahead.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The takeover “was certainly the right thing to do—and it was done fairly well, too,” said Paul Krugman in The New York Times. But while it will help save Fannie and Freddie, and probably help lower mortgage rates, it won’t save the U.S. economy from its financial crisis. “Save the home lenders, save the world? If only it were that simple.”
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
'Make legal immigration a more plausible option'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
LA-to-Las Vegas high-speed rail line breaks ground
Speed Read The railway will be ready as soon as 2028
By Peter Weber, The Week US Published
-
Israel's military intelligence chief resigns
Speed Read Maj. Gen. Aharon Haliva is the first leader to quit for failing to prevent the Hamas attack in October
By Justin Klawans, The Week US Published