Charles Calomiris and Stephen Haber on Fragile by Design
EconTalk
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Fanny and Freddy Were the 800 Pound Gorilla in the Mortgage Market
The key thing to recognize is that fanny may and freddy mac were the 800 pound gorilla in the mortgage market. They were giving effectively what people regarded as a pretty good put option. Only after we started seeing the default experiences in some of the categories of mortgages did we realize that they were effectively sub prime quality. The reason was because of the starti in two thousand four the rise of the so called alt a, non documented mortgagesand we didn't really know how severe those risks were until we saw it starting in two thousand seven.
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