The Fed Won't Solve Fannie and Freddie's Problems
Peter J. Wallison, American Enterprise Institute | July 14, 2008
Despite warnings of their imminent collapse, with the help of US government, Fannie Mae and Freddie Mac should be able to survive and stock market panic can be avoided. ++ Since the two companies have $5.3 trillion in liabilities, the Fed will need to step in if they become insolvent or consequences could be dire. ++ Their survival, however, is not necessarily good news: governmental intervention is only a temporary measure and it seems that no lessons have been learned. ++ In the long run it might result in loss of market discipline.
