Yesterday, Henry Paulson called for Congress to pass a multi-billion dollar bailout of Fannie Mae and Freddie Mac, the nation's two biggest mortgage finance companies. While their collapse has shocked many, the American Prospect's Dean Baker isn't surprised. In February he wrote that the Bush administration's stimulus package would "hasten the collapse of Fannie and Freddie".
Not to be outdone in the prescience department, Prospect co-founder Robert Reich was urging concern over the future of the housing giants way back in 2003. He argued that the privileged positions of Fannie and Freddie as corporations backed by the federal government gave them an incentive to take undue risks, as they did with the subprime investments that caused their collapse this year. A year later, when Fannie was caught up in an accounting scandal, he again warned that the company's problems were much deeper, requiring tough regulation by the feds.
--The Editors
