The Fannie and Freddie Bailout Rolls On

Sixteen months after [Fannie and Freddie] were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.

Here is why the bailout continues:

The administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market.

That is, subsidies to Fan and Fred help transfer income to a key Democratic constituency.

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