Shaky Ground

Housing was at the root of the 2008 financial crisis, and, seven years after the meltdown, homeownership finance is still the biggest unsolved issue in the management of the economy. Fannie Mae and Freddie Mac, gigantic entities with assets in the trillions of dollars, were created by Congress to se [...]
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Housing was at the root of the 2008 financial crisis, and, seven years after the meltdown, homeownership finance is still the biggest unsolved issue in the management of the economy. Fannie Mae and Freddie Mac, gigantic entities with assets in the trillions of dollars, were created by Congress to serve the dream of the U.S. as a global pioneer in creating a society of individual homeowners. A few days before Lehman Brothers declared bankruptcy, the U.S. Treasury put Fannie and Freddie into "conservatorship," a kind of government life support system, because their failure would have caused worldwide economic chaos. Today, Fannie and Freddie are still in conservatorship, with their profits redirected toward reduction of the federal deficit, which leaves them dangerously low on financial reserves. Russia, China and Japan are among the countries invested in Fannie and Freddie bonds; if they lost confidence in the safety of these instruments, the worldwide economic and political consequences would be severe. In SHAKY GROUND, Bethany McLean brings the biggest underreported aspect of the crisis into the public light and explains why the situation of our mortgage finance system held in limbo is dangerous and unsustainable - and must be placed on firmer ground.