Summary
The problem lies in how Fannie Mae and Freddie Mac were created. They are Government Sponsored Enterprises.
The word "sponsored" is key. It means the companies could operate for all the world as if they were private for-profit companies, but they always carried with them the implicit understanding that, should anything go awry, the government would be there to bail them out.See the full content of this document
Extract
An Embarrassing Bailout
And that brings us to today.
Over the weekend, Treasury Secretary Henry Paulson decided the two mortgage giants shoul...See the full content of this document
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