Shut Down Fannie Mae and Freddie Mac and Unleash the Free Market
December 17, 2016
Remember the financial crisis and market meltdown from late last decade? That wasn’t a fun time, and we’re still dealing with some of the fallout.
Let’s specifically look at Fannie Mae and Freddie Mac, the two privately owned but government-created housing finance institutions (also known as government-sponsored enterprises, or GSEs). Fannie and Freddie receivedgiant bailouts during the crisis, but they weren’t shut down. Instead, they have continued to operate, continued to benefit from implicit government subsidies, and continued to dominate housing finance because of their government-protected status.
Under the conditions of the bailouts, however, the excess cash generated by this government-subsidized duopoly have gone to the Treasury rather than to shareholders (incidentally, I wrote “excess cash” rather than “profit” because I think of the latter as money that is fairly earned in a competitive marketplace, whereas the earnings of the GSE’s are the result of an artificial…
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