Can Freddie and Fannie be saved?

In Congress, a debate erupts over whether the government can -- or should -- save government-run mortgage giants Freddie Mac and Fannie Mae

Is this curtains for FannieMae?
(Image credit: Corbis)

A debate is breaking out in Washington over how and when the government should reform beleaguered mortgage finance giants Fannie Mae and Freddie Mac. Treasury Secretary Timothy Geithner told Congress last week that the administration still has to "take a fresh, cold, hard look at the core problems" that nearly ruined Fannie and Freddie before unveiling a reform plan, which is expected next year. But some Republicans want the administration to immediately start phasing out the institutions, which the government took over as they crumbled during the housing meltdown. Are Fannie and Freddie worth saving?

Propping up Fannie and Freddie only makes matters worse: "Fannie Mae and Freddie Mac are the poster children for what is wrong with 'state capitalism' or economic fascism,'" says Richard W. Rahn in The Washington Times. These government-backed behemoths helped cause the mortgage crisis with their "unsound financial practices," then, instead of letting them go bankrupt, the government bailed them out. As long as the government props them up, the "bad practices" will continue.

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