Monday, September 20, 2010

Fannie and Freddie Acquitted

Several neoliberals/libertarians have argued that Fannie and Freddie caused the housing bubble, including Ron Paul.

It turns out that the evidence is in, and the verdict is not guilty:

Fannie / Freddie Acquitted

The Conservator’s Report on Fannie and Freddie is out.

Fannie Mae and Freddie Mac are members of a long list of individuals and entities including Gary Condit, Tom Delay, Michael Jackson, Rod Blagojevich and JonBenet Ramsey’s parents. These are folks who were unjustly tried and convicted in the popular press essentially on the grounds that they were creepy or otherwise unsavory characters.

As I hope to continue to argue, being creepy, a bad person, or even a usual suspect does not make one automatically guilty of any particular crime. In this case government subsidies in the housing market are a bad idea for a host of reasons and have been for years. I will testify to this with vigor and passion.

However, that does not mean that Fannie or Freddie caused the housing bubble. Indeed, by my count they were among the biggest victims of it.

The proper question is not: What story is consistent with my general philosophy or worldview?

The proper questions is: What story is consistent with the facts? 

Read the rest here.

To be clear, while I'm glad to see my own conclusions vindicated, (1) I don't think the "Fannie/Freddi did it!" meme will ever go away because it is neoliberal dogma now, and (2) I'd still like to see Fannie and Freddie ended because they provide an easy path for laundering bad loans (and backdoor bailouts).