annie Mae and Freddie Mac have been quietly redistributing risk and cash on a massive scale, finds Prof. Benjamin Keys
March 17, 2015
Jake J. Smith

When millions of homeowners defaulted on their mortgages in 2008, many pointed the finger at two less obvious culprits: Fannie Mae and Freddie Mac. The two mega mortgage buyers had been picking up risky loans and selling them with a guarantee of repayment. This amplified the housing crisis and forced the Federal government to bail them out at the taxpayers' expense. Ever since, there’s been a serious movement to dismantle Fannie and Freddie.

But last week, Chicago Harris Prof. Benjamin Keys released a paper suggesting that Fannie and Freddie might be doing the economy a hidden favor by redistributing risk and cash—to the tune of $20 billion. Keys explains what’s going on, and what it means for American housing policy.

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