The misleading treatment of Fannie Mae and Freddie Mac is just one example of a pervasive feature of Freefall: It often traffics in ideological spin. Their borrowing-cost advantage was worth billions per year. Reflecting the implicit guarantee, their bonds paid lower yields than those of other private financial institutions. Fannie (and Freddie) had an all-but-explicit guarantee and received other favored treatment from the government. There was never a government guarantee for its bonds had there been, its bonds would have earned a lower return, commensurate with U.S.
Their estimates of taxpayer risk were based on the assumption that “the implicit government guarantee on GSE debt is equivalent to an explicit guarantee.” In Freefall, by contrast, Stiglitz declares, “Fannie Mae began as a government-sponsored enterprise but was privatized in 1968. In the above-mentioned report Stiglitz and his coauthors noted the view that there was an implicit government guarantee that enabled Fannie and Freddie to borrow at below-market interest rates. The loss imposed on taxpayers was recently estimated by the Congressional Budget Office at $325 billion through 2011, with additional losses to come. Their debts were assumed by the federal government.
In 2008 Fannie Mae (and its sibling, Freddie Mac) both failed. In 2002 Stiglitz and two coauthors produced a report, commissioned and published by the government-sponsored housing agency Fannie Mae, stating that the risk of a failure by Fannie Mae was “extremely small” indeed, “under the assumptions they adopted, the risk to the government from a potential default on GSE debt is effectively zero.” That report is mentioned nowhere in Freefall. In 2001 Joseph Stiglitz was co-recipient of the Nobel Prize in economics, a fact prominently noted on the dust jacket of Freefall, his book on the financial crisis.
0 kommentar(er)
