Monday, July 21, 2008

How Fannie and Freddie Made Me a Grumpy Economist (Christopher Westley)

The usually optimistic Christopher Westley goes on a radio talk show to talk about Freddie and Fannie, but can't find anything good to say about the bankrupt monstrosities:

The job fell to me, as it does at times, to do a radio interview. And the topic was — what else? — Fannie Mae and Freddie Mac and the state of the banking system in the United States.

While preparing for this interview, I felt an unusual sense of foreboding.

Why was this, I wondered? My usual attitude going into such exchanges is one of optimism, because the message of economics is essentially optimistic. And I am optimistic — about the economy, its resiliency, and the good times ahead, no matter the current state of affairs. Life is too short for despair, and my study of the economy rarely justifies it.

But not this time. I could not think of much positive to say about Fannie and Freddie, the quasi-public entities that purchase mortgages from banks for resale to investors as mortgage-backed securities, nor about the quality of the political and professional class calling the shots now that they are insolvent, nor about what was likely to result from the proposed solutions to their problems.

Read the rest

No comments: