We're still on the hook for Fannie Mae and Freddie Mac. Let's abolish them.

  @FortuneMagazine October 31, 2013: 6:49 AM ET
BAI18 fannie mae hq
(Fortune)

Washington is renowned for having a short memory, so as Congress considers what to do with Fannie Mae and Freddie Mac, we taxpayers must remind it of the harmful role the duo played in the subprime mortgage meltdown. Congress authorized these government-sponsored entities, or GSEs, to purchase mortgages from banks and other originators and package them into securities with guaranteed payments for investors. That was supposed to expand the amount of investment flowing into mortgage finance, making it easier and cheaper for middle-income families to buy homes. But as for-profit entities, the GSEs discovered they could make big bucks operating essentially like giant hedge funds, issuing cheap debt with implicit government backing and investing the proceeds in high-yield, high-risk mortgage securitizations issued by Wall Street. They made zillions for their shareholders and management until, of course, the housing market turned and mortgage defaults skyrocketed, leaving their highly leveraged operations insolvent and wards of the state.

Join the Conversation
CNNMoney Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.