Articles

Voters Want Economic Leadership

July 16, 2008

Elections are often reshaped by unexpected and fast-moving events, and when this happens a candidate who quickly takes the lead on the new issue can bolster his chances to win. There is such an opportunity now for Barack Obama and John McCain with the crisis facing Fannie Mae and Freddie Mac.

The mortgage giants touch tens of millions of people because their core business is to buy, insure and securitize home loans. But they act like huge hedge funds with their portfolios worth hundreds of billions. As government sponsored enterprises (GSEs), they have an implicit federal guarantee that allows them to borrow money more cheaply than competitors. They have used that advantage to make ever-larger bets in their portfolios, generating big profits when home prices were rising, but big losses when housing weakened.

FULL ARTICLE: http://online.wsj.com/article/SB121625104564560159.html

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