Fannie, Freddie Critic Ridiculed In 2000

By FRED L. SMITH JR. | Posted Wednesday, September 24, 2008 4:20 PM PT

It is now consensus that Fannie Mae and Freddie Mac are at the heart of the
systemic meltdown we are seeing in the mortgage market. They are costing
taxpayers billions through their own bailouts and through the role they
played in fueling an artificial mortgage boom.

But eight years ago, when I testified before Congress that Fannie Mae and
Freddie Mac's "special privileges create a serious hazard to the
market, to taxpayers (and) to the economy," my criticism of these
sacred financial entities was met with ridicule.

At the hearing on June 21, 2000, before the House Financial Services
Committee, I called the government-sponsored enterprises "strange
organizations, neither private- sector fish nor political-sector fowl"
and said that "as a result, no one is quite sure how these entities
should be evaluated or held accountable."

I offered my opinion that the rapid growth of their debt portfolios and the
new risks Fannie and Freddie were taking on -- such as the purchase of
various unproven mortgage instruments -- "will certainly increase the
likelihood of a Fannie-Freddie default."

Read the rest at:

http://www.ibdeditorials.com/IBDArticles.aspx?id=307146607742935

Ed

-- 
"The ultimate result of shielding men from the effects of folly is
to fill the world with fools." --Herbert Spencer
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