How Washington Failed to Rein In Fannie, Freddie

As policymakers now set out to decide what role government, and the two companies, should play in the mortgage business, the failures of the past two decades offer a cautionary tale.

Blessed with the advantages of a government agency and a private company at the same time, Fannie Mae and Freddie Mac used their windfall profits to co-opt the politicians who were supposed to control them. The companies fought successfully against increased regulation by cultivating their friends and hounding their enemies. [snip]

But most of all, the companies were protected by the belief widespread in Washington -- and aggressively promoted by Fannie Mae and Freddie Mac -- that their success was inseparable from the expansion of homeownership in America...

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