The NYT is reporting that the bailout and nationalization, I mean conservatorship, of Freddie and Fannie is going to be far worse than expected by anyone not reading Mises.org. In any case, somehow I think we know the spin already: this is a failure of the market, since the mortgage giants were, after all, privatized some years ago. When I read such things, and we will all read plenty, one has to wonder whether this is just ignorance/misunderstanding at work, or outright manipulation of obvious facts to serve ideological ends. It’s probably some of both. Anyway, free marketeers had better get ready to make the point that this is an example of the failure of half measures, for had it been clear to these institutions that they would bear the liability for the lending–which of course they will not–the mortgage problem would never have gotten this out of hand. It was precisely the legal ambiguity about Freddie and Fannie’s status as market players–are these full market institutions or government-protected and subsidized rackets?–that is the source of the problem here.
The Spin on the Mortgage Disaster
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