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Text size [+][-]  Saturday November 21 2009GLOBAL EDITION

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14 Jul 2008 20:26

Lethal injection?



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The Federal Reserve opened the lending window to the government-sponsored enterprises Fannie Mae and Freddie Mac, while Treasury secretary Hank Paulson asked Congress to allow an increase in the government’s credit lines to the GSEs of $2.25bn and to allow the government to make equity investments in them. The GSEs own or guarantee $5.2 trillion of US home mortgages.

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Fannie Mae and Freddie Mac distort the US economy, and one option now available is gradually to kill them off. They can’t be closed immediately, but if they were run down though higher fees and lower salaries, market forces would probably replace them within five years.

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