Government Takeover of Fannie Mae and Freddie Mac

On September 7, 2008, Fannie Mae and Freddie Mac were placed under conservatorship under the auspices of the FHFA. Given the GSEs’ status, this is equivalent to bankruptcy protection. The step was taken given the GSEs’ importance to the U.S. housing and mortgage markets, exposure to subprime and Alt-A mortgages, undercapitalization, and instances of past mismanagement. In various ways, the GSEs accounted for $5.2 trillion—or almost half—of the U.S. mortgage market at the time of the crisis. It is arguable that they did a decent job of managing their risks given the pressures they were under and developments in the housing market. Yet it’s also arguable that with that kind of volume and market ...

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