dlaw

Fannie Mae: 'Business As Usual'

Deep Creek Dan,

The private system simply can't touch the capital efficiency of the agencies. If Fannie and Freddie's book exploded in size, Mr. Shedlock's site will show you that the private book double-exploded. Maybe triple.

If you're a goldbug, you think that all fiat money is nonsense and the world has to be de-leveraged by 95% or something. Obviously that's silly. The government's capital efficiency is what got America out of the Great Depression and it's what we're going to turn to now.

There are plenty of capital-inefficient, commoditized financial services which can and should be absorbed by government or quasi-government agencies - running them not as programs but as going concerns with balance sheets.....and a little credit enhancement. Since the entire banking system depends on either loaning money to or borrowing money from the government at the risk-free GOVERNMENT rate, it's not a question of whether the government CAN handle the debt load, it's that the government already does, whether we want to acknowledge it or not.

If you want to call that socialism or something, fine. Look at the growth in world GDP since the end of WW2. If that's socialism, we need more of it.