Fannie Mae and Freddie Mac's risk hedges were the same as Enron's. Yet no one talks about them the same way. They are Federally chartered, and have sweet sounding marketing campaigns tied to the American dream of home ownership, so they don't get looked at with a critical eye. Why bail out something that has become so big and unwieldy, yet is such a big part of the U.S. Economy because they are tied to the bulk of so many people's net worth, when their failure can jeopardize our whole economy? If they fail, the U.S. banking system fails, because it is so dependent on Fannie and Freddie debt. Then taxpayers are on the hook for a bailout that will make the savings and loan scandal look like chump change. Better to get out now, and absorb some of the hit, than wait for a total failure and absorb a monstrous hit that will devastate us. If we ease the things down to worthless--and they are worthless without us subsidizing them--some of the smaller banks that have a lot of their reserves tied up in preferred shares will fail, and it will cost the taxpayers something in a bailout. If we let those monsters keep breathing fire, we risk a bailout that could destroy our economy. It's a stupid game of Russian Roulette that doesn't look past the tip of our noses.
