"Now It Gets Serious"
Peter Wallison did a good write up on the past and current situation of the GSE's. It's long and minus some of the politics, brings a reader up to speed on what's going on in Washington. A couple of highlights.
"To place this in some perspective, all Treasury debt held by the public totals $4.4 trillion, and all corporate bonds outstanding total $2.9 trillion. Fannie's and Freddie's liabilities--including both their MBS guarantees and their borrowings--come in right in the middle, at $3.7 trillion. Thus, only two companies--both of which are GSEs and implicitly backed by the U.S. government--account for more default risk than all other U.S. corporations combined."
This blog has pointed out that congress is trying to put the genie back in the bottle. The 'systemic risk has already been created. And why on Earth were these firms allowed to lobby congress?
"It is important to recognize the enormous political power of Fannie and Freddie, and their ability to marshal support from constituent groups such as homebuilders and realtors. If Congress itself cannot summon the political will to overcome the resistance of the GSEs and their support groups, the regulator certainly will not be able to do so. Punting the decision to the regulator may get it off the congressional agenda, but it will leave a serious problem unresolved."