Thought on Fannie and Freddie bailouts

The U.S. government on Sunday seized control of mortgage backers Fannie Mae and Freddie Mac in order to stabilize the housing and credit crisis. Today the Congressional Budget Office announced that the cost of bailing out these two companies should be reflected in the federal budget. That's about $5 billion in liabilities combined!

For decades Fannie and Freddie, though publicly traded companies, have operated without the regular oversight and accountability of typical corporations. Fannie Mae was created in 1938 as part of Franklin Roosevelt's New Deal to provide liquidity to the mortgage market. Then in 1970 Freddie Mac was founded to compete with Fannie Mae. Talk about a recipe for disaster...

The companies finally collapsed because their accounting methods inflated their worth. That's what happens when companies aren't under regulatory supervision. There's nothing wrong with the government helping out the mortgage market, but they shouldn't have create such a hybrid monster to skirt the regulatory system. Now the taxpayers are going to pick up the tab again.