Why Obama Needs to Take Immediate Control of Fannie Mae and Freddie Mac

Jared Bernstein
October 21, 2011 | 12:00 am

When historians look back at this benighted moment in time, they may find themselves puzzled by how we refused to take the necessary steps to improve our economic situation. Depending on what happens in coming months, they may find that the best solutions—aggressive fiscal and monetary stimulus here in the United States, bank recapitalization and debt restructuring in the EU—were left on the table, while millions unnecessarily suffered.

A footnote in that history may be the decision of Fannie Mae and Freddie Mac not to do more to help the housing market recover. Faced with a flailing market and an alarming amount of underwater mortgages, Fannie and Freddie have nonetheless refrained from implementing bold plans to help out homeowners, citing their fiduciary duty to taxpayers as the reason. But by encouraging more refinancing and principal reductions of the mortgages these institutions either hold directly or insure, our government-sponsored housing giants could simultaneously improve both housing security and the overall economy.