Friday, 16 May 2008

Volcker vs. Fannie and Freddie


Paul Volcker has cottoned on to the bizarre and currently unhelpful nature of the GSEs I discussed a few days ago -- the epitome of privatised gains and socialised losses. From WSJEconBlog via Naked Capitalism:
...he questioned the role of government-sponsored enterprises such as Fannie Mae and Freddie Mac during the recent turmoil in mortgage markets. “Where were Fannie Mae and Freddie Mac?” Volcker said.

“What kind of system do we have” when agencies charged with the public interest in housing are instead “out serving the interests of their shareholders?” he added.
What kind of system indeed. As always, the rules determine the behaviours observed.

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