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Wsj Looks A Little Foolish Now

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by Matt Cooper
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Nov 20 2007 12:00am EDT

WSJ Looks a Little Foolish Now

A week ago today, the Wall Street Journal was announcing on its front page that Fannie Mae and Freddie Mac were back, resilient shock absorbers for the private mortgage market. The piece quoted a Freddie Mac consultant and defender saying how much worse things would be without these two Government Sponsored Enterprises in place and noting that the stocks had held up relatively well compared to private mortgage companies. The story left the decided impression that the GSEs, once under fire, now seemed to have taken on new life.

Oops. Today we see shares of Freddie Mac collapsing on word they may have to cut their dividend to make up for unexpectedly large losses. Fannie Mae is way off too.

The GSEs may have once served a purpose but today, instead of looking like the ideal public-private partnership, they seem like the worst of all possible worlds; private profit and socialized risk.

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