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Folks are, rightfully, worried about Fannie Mae and Freddie Mac, both of which are tanking so rapidly that there's talk of a federal bailout. The problem with Assignment Desk, of course, is that there's lots of stuff I don't know enough about to comment on. So I asked two economists I know and respect, Jared Bernstein and Dean Baker, to give the skinny. Jared directed me to an analysis he just wrote for CNBC, where he says:
The prospect of Fannie Mae and Freddie Mac failing is almost too unsettling to contemplate. As one investor told the New York Times, “If people lose faith in Fannie and Freddie, then the whole system freezes up, and nobody can buy a house, and the entire housing market can crash.”We’re talking about a pair of institutions that hold or guarantee more than half of the nation’s mortgages.In other words, they’re TBTF (too big to fail) and it’s a sure bet that we won’t let them go under. Treasury Secretary Henry Paulson apparently asserted today that the government is not planning an imminent bailout, by which he means that the government is busy planning an imminent bailout.He's got more analysis at the link. Dean Baker e-mailed his thoughts on what was about to happen, and how we should feel about it:
