Federal Reserve Board Chairman Ben Bernanke discussed alternative mechanisms for supporting the mortgage market other than the unlimited implicit guarantee that it had given to Fannie Mae and Freddie Mac. While it is certainly reasonable to ask whether the government role in the mortgage market can be better structured, the government also has given an implicit (now largely explicit) guarantee to the creditors of all the major banks. Fannie Mae and Freddie Mac do not seem to hold any special status given current policy. It would have been appropriate for the media to note the government's guarantee of debt at all major financial institutions (except Lehman Brothers) when discussing Bernanke's comments. Many readers might have been wrongly led to believe that the government's guarantee for Fannie and Freddie was the exception rather than the rule.
--Dean Baker
