The Age of Entitlement: America Since the Sixties

by Christopher Caldwell

Let us look at these GSEs. The Federal National Mortgage Association (Fannie Mae) was launched as a government bureau with the New Deal of the 1930s. It became a company in 1968, when Lyndon Johnson, desperate to bring his war budget closer to balance, privatized it. Most investors understood that privatization as a fiction, meant only to take the government’s housing debts off-balance-sheet, but its consequences were real enough. The office now became a corruption-sowing hybrid. It was public in the sense that it carried an implicit guarantee of government support—which the government bailout it received in September 2008 would make perfectly explicit. But it was private in the sense that its government-connected executives earned salaries that, by the turn of the century, ran into the tens of millions. In 1968, Congress also calved off part of Fannie Mae to form the Government National Mortgage Association (Ginnie Mae). Two years later it established the Federal Home Loan Mortgage Corporation (Freddie Mac), in order to give the other GSEs “competition.”