The Christmas Eve nationalization of Fannie Mae and Freddie Mac (or at least removing any doubt about their futures) has John Palmer dismayed:

My guess is that these agencies will become bloated agencies of rent-seekers throughout the US. It would take another Reagan-type sweep to de-politicize the mortgage insurance business.

Tom Petruno is puzzled why investors are buying shares in this company because private shares will eventually be worth zero. I think it's an example of the greater fool theory. When the Treasury statement says they are "retaining flexibility" to not unwind their participation in the mortgage market, can there be any doubt that the Federal government is not being honest in saying it wants "the private market ... to provide a larger source of mortgage finance." The only credible commitment the administration has made is to not ask Congress for permission to expand its role in those markets.

Labels: economics, housing