Regulating Fannie and Freddie: Empire Wealth

Regulating Fannie and Freddie

On Friday, the Securities and Exchange Commission charged the former CEOs of Fannie Mae and Freddie Mac for their role in the subprime mortgage scandal. They're accused of intentionally understating how exposed Fannie and Freddie were to mortgages we now know were bound to go bad. Those losses led to the government takeover of Fannie and Freddie and a call for more regulation of the financial industry.

But commentator and business historian John Steele Gordon says there's still unanswered questions.

Fannie and Freddie were, in theory, independent corporations. They were listed on the New York Stock Exchange. But real corporations can go broke -- just ask the stockholders of Lehman Brothers and Bear Stearns -- but everyone knew that the government in the last resort would stand behind these government sponsored enterprises. And it did.