Fannie and Freddie follies

Fannie Mae and Freddie Mac thrived for nearly four decades as companies that were private in name only. The bonds and mortgage-backed securities they sold to Wall Street had a unique advantage over their competitors': an unstated guarantee that the federal government would prevent defaults. And sure enough, when the housing bubble burst and the companies' bets went bad, regulators promised to supply up to $200 billion to cover any losses. The two companies are due to remain in a federal conservatorship until the end of 2009.

November 19, 2008