Wednesday, 27 August 2008

The Future of Fannie and Freddie (in a nutshell)

I wrote about the destruction of Fannie Mae and Freddie Mac and the meaning of moral hazard. Right on cue came this statement from Jason Furman, the economic policy director for Obama campaign, in an interview with The Financial Times:

Mr. Furman indicated that Mr Obama could back further intervention to support Fannie and Freddie, but said “there must be no bail-out” of “shareholders or management”. Fannie and Freddie had a “problematic business model – heads they win, tails the taxpayer loses”. He said: “Any fix for their problems needs to be part of a longer term solution that revises that business model.”
The 38-year old Mr. Furman is a protégé of Bob Rubin.

There you have it.