The New York Times’ Andrew Ross Sorkin challenges the conventional wisdom that the ongoing survival of Freddie Mac and Fannie Mae, the only folks out there buying mortgages, is costing the taxpayers money. In fact, Freddie and Fannie’s losses (which will total several hundred billion dollars) amount to water over the dam. The fact that the zombie agencies realize new losses every month is an accounting artifact. And neither agency, Sorkin notes, is losing money on current activities.
That’s reassuring news – though we’re not entirely convinced there is no implicit subsidy in the agencies’ assumption of risk of default on new mortgages. In any event, it would be nice to figure out when and how Freddie and Fannie can be buried, or resurrected as housing lenders/insurers with much narrower missions.