Paul Krugman discusses the GSE situation and concludes:
And let’s be clear: Fannie and Freddie can’t be allowed to fail. With the collapse of subprime lending, they’re now more central than ever to the housing market, and the economy as a whole.
That seems about right. But it's one thing to say that the enterprises can't be allowed to fail and it's another thing to say that the shareholders' investments in the enterprises can't be allowed to fail. Why can't the whole thing be nationalized? There seem to be sound economic reasons for letting the executives press the big red "Come Save Us" button, but surely there should be consequences.
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