After Much Rumor The Fed & Treasury Support Fannie & Freddie
Over the last few days there have been misreports and rumors about the government's backing of Fannie Mae and Freddie Mac, the two quasi-government financial institutions more formally referred to as GSEs. There has generally been an implied Federal government support for these corporations and their assets since their inception. In that vein, today the Treasury and Federal Reserve finally stepped in to provide the first level of formal support - something nearly everyone has anticipated.
Many 'free market' advocates, fiscal conservatives, responsible citizens and others outraged by this crisis support a position of letting Freddie and Fannie fail. Of letting anything and everything fail. Those are noble yet naive positions based on a very simplistic view of the world. The last thing anyone should want is the global financial system to shudder with such force that entire economies simply collapse. There is little other than theory as to what would happen including if, how and when economies would recover. This isn't Alice in Wonderland and as such, no one should ever want to find out how deep the rabbit hole is.
Frankly, the government should have done something like this long ago. It's a matter of confidence and we shouldn't be waiting until the wheels are falling off to enforce confidence in our financial system and its institutions. Yet, government and regulators are making mistake after mistake by failing to deal with transparency issues. Of course, lack of transparency is exactly how we got here. So, it seems highly lost upon regulators and financial institutions that this is imperative. The very lack of transparency should have been dealt with much more forcefully across any and all areas of potential concern in the financial system. The fact that it hasn't foolishly reinforces an even further erosion of confidence.
We can all debate the merits of the current system but not in the middle of a crisis. First we must attempt to stabilize the financial system. And, while it sounds rote, the faster we get to transparency in all of these financial crises the better. That includes ones that are festering but haven't yet blown up. It appears we are headed for full-blown disasters before true change is embraced. What's new?
Many 'free market' advocates, fiscal conservatives, responsible citizens and others outraged by this crisis support a position of letting Freddie and Fannie fail. Of letting anything and everything fail. Those are noble yet naive positions based on a very simplistic view of the world. The last thing anyone should want is the global financial system to shudder with such force that entire economies simply collapse. There is little other than theory as to what would happen including if, how and when economies would recover. This isn't Alice in Wonderland and as such, no one should ever want to find out how deep the rabbit hole is.
Frankly, the government should have done something like this long ago. It's a matter of confidence and we shouldn't be waiting until the wheels are falling off to enforce confidence in our financial system and its institutions. Yet, government and regulators are making mistake after mistake by failing to deal with transparency issues. Of course, lack of transparency is exactly how we got here. So, it seems highly lost upon regulators and financial institutions that this is imperative. The very lack of transparency should have been dealt with much more forcefully across any and all areas of potential concern in the financial system. The fact that it hasn't foolishly reinforces an even further erosion of confidence.
We can all debate the merits of the current system but not in the middle of a crisis. First we must attempt to stabilize the financial system. And, while it sounds rote, the faster we get to transparency in all of these financial crises the better. That includes ones that are festering but haven't yet blown up. It appears we are headed for full-blown disasters before true change is embraced. What's new?
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