You would think after all the ink that has been spilled over the mortgage meltdown that the Times would get the basic story right. But no. This morning’s piece on the “Cost of Seizing Fannie and Freddie” still peddles the theme of “lenders run amok”. These agencies, which always had implicit government backing, operated in the secondary market. They didn’t make the loans, they bought the loans. By retaking them and continuing to operate them at a loss (the article cites a CBO estimate that the cumulative cost may approach $400B), while sparing holders of agency bonds any losses themselves, the government is using them as a principal vehicle for its bailout of the financial sector.
The word bailout is important here. Readers need to know where and how their tax dollars are being used to protect wealth-holders against reductions in the value of their assets. It is interesting that the federal government spends $80 a month per house to cut grass in a subdivision outside of Phoenix (xeriscaping, anyone?), but really, this is third order.