One month ago Federal Reserve Chairman Alan Greenspan offered constructive, even merciful criticism of the Enron-style accounting practices found in Fannie Mae and Freddie Mac, the federal government's artificial lifts for the housing market. Via teleconference from Philadelphia, Greenspan advised Congress on what to do with a pair of state institutions that hid $16 billion of losses. Namely, keep them well away from home-buyers:
"The assets required for Fannie and Freddie to achieve their mission are but a small fraction of the current level of their assets," Greenspan said. Thus if Congress were to limit the two companies' holdings so that they can achieve their mission, a substantial liquidation would be required over time, the Fed chief said. ...Greenspan said the Fed also sees little evidence to support the notion that the availability of fixed-rate mortgages is tied to the size of Fannie's and Freddie's portfolios. He also said it is "difficult to see" how the two companies' portfolios can influence home ownership.
He was likely holding his tongue. What are the home mortgage legacies of Fannie and Freddie worth? Less than their future.