The Biggest Risk in Today's Financial System Is...

The Biggest Risk in Today's Financial System Is...

Housing was at the root of the global financial crisis in 2008, and seven years on, the mortgage market is still a huge unsolved economic issue. Fannie Mae and Freddie Mac, the government-sponsored enterprises that support American homeownership, were placed on a kind of government life support at the onset of the meltdown. Their “conservatorship” was meant to be temporary, but the government still hasn’t figured out how to resolve their limbo. At one point, Fannie and Freddie had a combined $5.3 trillion in outstanding debt. They’ve become profitable again and have paid $231 billion back to the U.S. Treasury. But their profits are going toward reducing the federal deficit, leaving them undercapitalized. This despite the critical purpose they serve of guaranteeing most Americans’ mortgages. And as explained in the excerpt below, the two companies now also face lawsuits from big investors over the way the government is handling them. This is an investigation into why the country’s mortgage finance system is – again – in a dangerous and unsustainable situation.

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