Economic Knowledge from March 2005

by David K. Williams, Jr. | 10:48 am, September 27, 2008 | Comments Off

Paul Cleveland, of the Ludwig von Mises Institute, wrote this article in March of 2005. A highlight from the article:

. . . many think that the U.S. government would prevent Freddie Mac and Fannie Mae from failing financially if changes in the market worked against their portfolio values. Whether this assumption is correct or not is unclear. However, what is clear is that U.S. taxpayers are on the hook to bail out these institutions at least up to the line of credit and potentially could be called on to pay much more if they failed. In fact, rightly or wrongly, investors generally believe that this is the case given the low risk profile the companies enjoy.

Looks like those investors were right.

To hear economic illiterates say that the current financial "crisis" is a failure of the free market would be laughable if it were not so sad.

Fannie Mae and Freddie Mac are creatures of government interference in the free market. And they have failed, with disastrous results.

BlueCarp recommends everyone read the articles at Mises.org. This is a good place to start.

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