Freaking people still have no idea what causes bubbles and busts.

Sigh it is so frustrating to see articles like this.

Dec. 31 (Bloomberg) -- Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.
“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.
The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.
The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.

Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.

“It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.
The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.” 

Not one mention that the FEDERAL RESERVE kept interest rates far too low for far too long artificially creating cheap credit? Would we have had a bubble if mortgage rates were at 10% instead of 5%?   Dont you think that also the governmental interference in the "market" of pushing Freddie and Fannie to make loans that in a free market they would not have made is to be blamed?

The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”

Boy sounds like Freddie and Fannie would be good stocks picks since the risk of total loss to stockholders is zero, but when you compare that to the governments history of running practically everything into bankruptcy (postal service, amtrak, social security, medicare,...)  its probably still a horrible investment.

Now instead of reining in Freddie and Fannie, we (the taxpayers) are guaranteeing any amount of losses.  Hmmmm Does that give them even more reason to risk my (taxpayer) capital? Or am I to believe that somehow the government will find enough regulations to keep them honest, even though they couldnt find enough regulations to stop the Tech bubble, Enron, Housing bubble, derivatives debt swaps crisis.

I wonder if they will ever figure out that a real "free market" actually contains irrational decisions, and at least when it doesnt the people who created the risk and made the poor decisions are penalized not innocent people and taxpayers.