The Heritage Foundation - Leadership for America

Following up on his apologia for Freddie Mac and Fannie Mae today, Paul Krugman blogs:

What you need to know here is that the right — the WSJ editorial page, Heritage, etc. — hates, hates, hates Fannie and Freddie. Why? Because they don’t want quasi-public entities competing with Angelo Mozilo.

And it’s true: We do hate Fannie and Freddie. But not for the reason the Krugman conjures up. We’re not afraid of Fannie competing with the likes of Countrywide Financial CEO Angelo Mozilo. If only that were the case!

The problem is that Fannie was Countrywide’s No. 1 enabler. In case Krugman wasn’t aware, Fannie was the biggest buyer of Countrywide loans. When he was CEO of Fannie, former Barack Obama campaign adviser Jim Johnson worked personally with Mozilo to streamline the two companies’ business relationship. Mozilo told Dow Jones he was “working very closely … with Jim Johnson of Fannie Mae to come up with a rational method of making the process more efficient by the use of credit scoring.“