White House eliminates bailout cap for Fannie Mae and Freddie Mac

(BUSINESS INSIDER) — On Christmas Eve, when the news was assured of getting no coverage whatsoever, the White House announced that it had eliminated the maximum bailout cap for Fannie Mae (FNM) and Freddie (FRE).

As some observers have pointed out, all the move really did was formalize what everyone has figured for decades, that the two zombie GSEs were truly organs of the federal government, and that their debts would be backed up ad infinitum.

[This] would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on.  [It] would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally [this] would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.

via Here’s The Secret Reason We Eliminated The Bailout Caps On Fannie And Freddie.

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