Fannie-Freddie Knee-Deep in Subprime Mortgages

by Sean Hackbarth

Conn Carroll didn’t take Paul Krugman at his word and found Fannie Mae and Freddie Mac were deeply involved in the subprime mortgage market. From the Washington Post:

In 2003, the two bought $81 billion in subprime securities. In 2004, they purchased $175 billion — 44 percent of the market. In 2005, they bought $169 billion, or 33 percent. In 2006, they cut back to $90 billion, or 20 percent. Generally, Freddie purchased more than Fannie and relied more heavily on the securities to meet goals.

By buying those loans Fannie and Freddie allowed lenders to issue more mortgages which were bought by Fannie and Freddie. That vicious circle lead to the two companies owning or guaranteeing half the U.S. mortgage market.

“Who Does Paul Krugman Think He’s Fooling?”

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