American Affairs, Spring 2018 / Volume II, Number 1
In one of the fateful moments in the financial crisis, Fannie Mae and Freddie Mac were placed in conservatorship on September 6, 2008, one week before the earth-shattering collapse of Lehman. The panic that followed the Lehman bankruptcy overshadowed the crisis facing the two mortgage giants, but the idea that these two companies could both face insolvency would have been ridiculed in the years prior to the crisis. After all, housing was not a speculative investment, and two giant companies focused almost exclusively on buying home mortgages and issuing mortgage-backed securities would seem to have little risk—or, at least, that was the general belief prior to the collapse of the housing bubble.
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