Steve J. Nelson

Who Killed Frannie?

I think when the history of the collapse of Fannie Mae and Freddie Mac is written thirty years from now, historians will identify foreign investors who held US agency debt as the hidden hand that tipped the former GSEs into conservatorship, with the implied threat that if the US government didn't clean up this mess and backstop debt that had previously been considered second to US Treasuries in terms of their solidity, than the Treasury itself could be next in terms of the Chinese, Japanese, Russians (yes the Stabilization Fund of the Russian Federation had SEVENTY BILLION in US agency paper) and Gulf Arab SWFs pulling their money out.

In a certain respect, perhaps this may prove to be a tipping point when Washington realized who is really now paying the bills for all of its foreign policy "indispensable nationhood" and domestic vote-buying/wealth redistribution schemes. In a sense, you could say it was the moment the U.S. found out it that our national credit card has a limit. But most likely the Obama Administration will pretend that none of this ever happened, given how Obama was Fannie and Freddie's no. 2 recipient of campaign donations in the GSEs final two years as quasi-independent Beltway bandits.