And let’s be clear: Fannie and Freddie can’t be allowed to fail. With the collapse of subprime lending, they’re now more central than ever to the housing market, and the economy as a whole.
Actually, they can be allowed to fail. Their investors can take a loss on their investment. This is how we’re told the system is supposed to work. There’s risk involved in investment. When investors take a loss this is just the weeding of the garden that is Capitalism.
We could make Fannie Mae and Freddie Mac into government institutions. The public could assume the risk and control over this kind of financing. But no, the most liberal voice in the New York Times thinks that just isn’t possible. Instead, private investors are allowed to make a profit on mortgages, but take a loss? That’s unheard of! The public will just pick up the slack there. That’s what free market capitalism is all about.
It’s the same old story. The poor can get poorer. But if rich investors have to lose even a little bit of money, it’s time for the government to make sure they stay rich, and good liberals will explain to you how that’s simply how it must be done because we need those rich people to stay rich or else something really bad will happen.
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