Relax About The Fannie And Freddie Bailouts, They're Just In The Same Business As The Fed

I don’t exactly disagree with what Tim Duy, Calculated Risk, and Dean Baker are saying about the decision to explicitly back Fannie and Freddie. But I think it adds to our understanding if you think of Fannie and Freddie as being, in effect, in the same business as the Fed these days.

That is, if you think about what the Fed is doing when it engages in “quantitative easing” — expanding its balance sheet by buying unconventional assets — you realise that it’s part of a broader provision of credit to the private sector by governmental or quasi-governmental agencies, which are ultimately financed or at least backstopped by public debt.

Read the whole story at Paul Krugman’s blog — >

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