As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so — by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed.
So the bailout of Fannie and Freddie looks like the Republicans are trying to play the financial just-pretend game simply until they leave office in February, after which time they can blame the failure of the “miracle of compound debt interest” on the incoming Democratic Congress.
So it’s politics as usual: play for the short run. In the long run — even next year — the real estate market will continue to drift down.
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