Fannie and Freddie: a fudge that works
Hank Paulson’s rescue plan for Fannie Mae and Freddie Mac shores up the companies and their combined $5.2tr balance sheets, allowing them to soldier on through the US housing crisis. But equity investors don’t like it — punishing the firms with another 30% cut in their share prices today — which sets the scene for a battle over the agencies’ mandates and ownership. Muddling through is the order of the day and only when the smoke clears should radical changes be considered.
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