J. Peter Wallison writes in this WSJ article that taxpayer losses on the bailouts for Fannie Mae and Freddie Mac will be around $400 billion. He note trenchantly that, “In typical Washington fashion, everyone has amnesia about how this disaster occurred.”
Wallison looks back to the efforts of Senate Republicans to rein in Fannie and Freddie in 2005 — efforts that were blocked by Senate Dems including one Barack Obama. Back then, the supposedly good intentions behind Fannie and Freddie (“Affordable home ownership for everyone!”) were all that mattered to the Democrats (and also some Republicans who were glad to take campaign funds from the two).
I wish that Wallison had gone back further, though, to the creation of these two government sponsored enterprises. They were NEVER necessary. The home finance market worked prior to federal meddling. The idea that the federal government should create enterprises to make home ownership more widespread and affordable was a bad one to begin with, not to mention the inconvenient fact that the Constitution nowhere gives Congress any such authority. Fannie and Freddie are prime examples of ideas that seemed good at the time to politicians and a few people who benefited greatly, but which have created gigantic costs spread across the whole nation now.
