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08 September 2008



For those whose irony meters are still functioning: Fannie Mae was privatized by Democratic administration only to be deprivatized (a Krugmanism) 40 years later by a Republican one.

I'm curious -- what is the free market fundamentalist (George?) position here? Is it bad to sell US mortgage backed securities to foreign entities? Those "saver" nations already own $1.3 trillion of Fannie/Freddie-issued long term debt (this was the real driver behind the deprivatization). If the US government can convince them to keep buying by providing a credible price floor (pledging $100 billion to buy F/F debt on the open market), that at least props up the mortgage / credit market if not the US real estate market per se. Whether this works for long remains to be seen. I doubt past the election anyway.

Needless to say, the private profit / public risk crowd wins again...

George Rebane

Wade, I think that on this we fly in tight formation. Never did like private profit/public risk. But then again, never did like public profit/private risk. When I make an investment on which the government insists on collecting capital gains tax on my profits, I want to be able to use all my losses from such investments in calculating my profits. Carrying forward only $3K of losses for tax purposes doesn't cut it.

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