A Republican administration has nationalised Fannie Mae and Freddie Mac, though it is nationalisation with US characteristics. As a result, US housing finance has been brought under direct government control and, in the process, the gross liabilities of the US government, properly measured, have increased by $5,400bn (€3,800bn, £3,000bn), a sum equal to the entire publicly held debt and 40 per cent of gross domestic product.Yet the administration is merely recognising the reality that these “government sponsored enterprises” were undertaking a public purpose, at the public’s risk, though not without dispensing vast rewards to management along the way. That is a scandal. Whether the body politic will recognise it remains unclear. Since this is a bipartisan mess, the likely answer is No.
So what has the administration done? Was there an alternative? Will it work? What lessons should be learned?
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