the GSEs were hit hard by the Volcker shock of the early 1980s. Fannie Mae came close to failure. But it survived, and as the housing market recovered in the 1990s, the GSEs flourished. Thanks to their residual tie to the federal government, the GSEs continued to enjoy a substantial discount in funding costs. By the end of the century Fannie Mae and Freddie Mac together were backstopping at least 50 percent of the total national mortgage market. Creating conforming loans—loans that qualified for GSE backstop—was the basis of the American home loan business. It is a deep irony that the era in
...more
