Fannie and Freddie

With Freddie Mac asking for $10 billion more, I assume we’re going to start hearing even more about conservative desire to do something about the GSEs. In that context, it’s worth noting that for all the sturm und drang on this subject, the actual proposals I’ve seen are pretty mild — Jihn McCain released a plan yesterday for a slow 15-year phaseout and I think that’s the mist radical idea out there.

Meanwhile, no matter what you do aren’t you going to be left with a major credibility problem? congress can pass a law saying “we promise we’re not guaranteeing these debts” but will that be credible? After all, they were never officially guaranteed in the first place. Yet when Congress voted in spring 2008 to lay the groundwork for bailing them out, it was barely even controversial. And there’s just no way for the 111th Congress to ensure that the 118th won’t change the law and authorize new bailouts.