Richard Mendales

Rescuing Frannie

All of this is rather ironic. Fannie Mae was established by Congress in 1938 to create a secondary mortgage market at a time when banks, which had been failing in droves during the Great Depression, were reluctant to make new loans; the objective of the new entity was to encourage banks and thrifts to make housing loans, knowing that there would be a market for them. In 1968, the original Fannie Mae was split into two entities--Ginnie Mae, which stayed a government entity, and today's Fannie Mae, which was privatized. The primary reason for privatization at that time was to take Fannie Mae's loan exposure off the government balance sheet, which was bashing against limits on the national debt because of the costs of the Vietnam War. What goes around...