The front page of today’s WaPo Business section has a nice clear diagram on how the Fannie and Freddie balloon is deflating – by reversing the process that created the bubble in the first place.
On the same page Columnist Steven Pearlstein, who recently did a fine job of nailing Sir Alan (Greenspan) to the wall for his role in the current unpleasantness, has some sound advice for Treasury Secretary Hank Paulson on Fannie and Freddie as well – get out the bazooka.
Strange as it may seem there is STILL no mention in WaPo coverage of the REAL problem with Fannie and Freddie – financing dysfunctional settlement patterns by failing to create any guidelines on the LOCATION of the dwellings covered by the mortgages they bought and packaged.
Perhaps the editors should reread the story by Juliet Eilperin datelined Seattle from 4 May 2008 in, of all places WaPo. The May story has a climate change focus but she presents a nice simple explanation of why LOCATION, PATTERN AND DENSITY – in a phrase ‘human settlement patterns’ are so important. Eiplerin underestimates the level of impact settlement patterns by a factor of 5 (the is 500%) but it is a start and should be enough to make clear what the REAL problem is with Fannie and Freddie.
The Eilperin story also reinforces the point Jim Bacon makes in Peter G’s post on Obama / Virginia: “When are we going to start making transport investments based on supporting functional and sustainable human settlement patterns?” More in Monday’s column.
EMR