CSI: Mortgage Giants

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Who killed Fannie Mae and Freddie Mac? Andrew Ross Sorkin today says it was Hank Paulson in the Treasury with the bazooka.
Sorkin argues that Fannie and Freddie were essentially prevented from raising new capital once Paulson was given authority to intervene with government cash. The power of the Treasury coupled with an uncertainty about how that power would be used frightened off potential investors, Sorkin argues.
Counter-factual guessing games is fun but even Sorkin doesn't come out and explicitly say that if Paulson hadn't received the authority to rescue the companies Fannie and Freddie would have been able to raise enough money to stay afloat. He simply says the authority made certain they couldn't.

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