In his ongoing effort to save his reputation, Alan Greenspan has become a consummate backseat driver. When it comes to the Fannie (FNM) / Freddie (FRE) bailout, however, we agree with him: shareholders don’t deserve a dime. WSJ:
[Greenspan] acknowledges that a government backstop for the shareholder-owned, government-sponsored enterprises, or GSEs, was unavoidable. Not only are they crucial to the ailing mortgage market now, but the Fed-financed takeover of investment bank Bear Stearns Cos. also made government backing of Fannie and Freddie debt “inevitable,” he said. “There’s no credible argument for bailing out Bear Stearns and not the GSEs.”
His quarrel is with the approach the Bush administration sold to Congress. “They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted — with necessary taxpayer support to make them financially viable — as five or 10 individual privately held units,” which the government would eventually auction off to private investors, he said.
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