Uncle Fred and Aunt Fannie

Well, they had to use the bazooka.

For all the talk of the Fannie Mae and Freddie Mac bailout, what I've not heard too much about is the future of the mortgage giants. If the government conservatorship ends, when will the end come? President Bush shrugged that one off, calling it a decision for Congress and the next administration (who can blame him? I'd just want to go play with my toys, too). Many pundits and politicos are squirming at the thought of Freddie and Fannie becoming permanent government entities.

This is fine with me. Fannie Mae started as a New Deal program in 1938, and was a federal agency until 1968, when it was privatized. Freddie Mac was created in the 70's to compete with Fannie. Though private, both were Government Sponsored Enterprises (GSEs). In our consumer economy, credit is king. Credit plays a more important role in our economy than at any time in the nation's history. Having a government entity play a stabilizing role in the largest credit market (mortgages) makes sense. Even some of the most stubborn disciples of laissez-faire economic policy understand that letting Fannie and Freddie (and Bear Stearns...) fail would have a profound, widespread, and ultimately, extremely detrimental effect on the overall economy.

And, just for fun, have a look at how Fox News frames this story in the first paragraph, versus the SF Gate and NPR:

Fox "News":
The U.S. government seized control of the mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) on Sunday, placing the liabilities of more than $5 trillion of mortgages onto the backs of the U.S. taxpayer.

SF Gate:
The federal government took control of Fannie Mae and Freddie Mac on Sunday in a bid to keep the two mortgage giants from failing, catastrophes that would have made home loans harder to get and taken the nation's housing collapse to a new level of crisis.

NPR:
The federal takeover of Fannie Mae and Freddie Mac is aimed at preventing a "serious risk to the financial system," which is "critical to our overall economy," Treasury Secretary Henry Paulson tells NPR. The Bush administration on Sunday said it was taking over Fannie Mae and Freddie Mac, the troubled mortgage companies that play a key role in the U.S. housing industry. The administration said it would funnel billions of dollars in taxpayer money into the companies to help keep them afloat.

For my money, NPR wins this one, as far as being truly "fair and balanced".