Freddie and Fannie

If you’ve read me for any length of time, you know I’m an unabashed believer in the free market. As I see it, just about any time government tries to mess with the free market, it creates consequences that lead to trouble.

Fannie Mae and Freddie Mac are in trouble today largely because, as Government Sponsored Enterprises, they operated under the implicit guarantee that the government would step in and save them, if necessary. That led to the kinds of risky investments that made a bailout necessary this week.

However, I’ve grudgingly felt the bailout was necessary because a total failure of the two companies would create greater harm to the economy. But here’s a different view (from someone who, by his own admission, will profit from the situation):

Tell me what you think. Should we just let Freddie and Fannie fail? Is it fair to honest, responsible, on-time mortgage payers to put them on the hook for up to $5 trillion in taxes to keep the companies solvent?