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City of London Spooked by Fannie's Looming Bankruptcy

From Volume 4, Issue Number 2 of EIR Online, Published Jan. 11, 2005

World Economic News

City of London Spooked by Fannie's Looming Bankruptcy

"Fannie Mae: Nationalize It or Privatize It," read the headline of the leading commentary in the London Financial Times, Jan. 3, reflecting fears in the City that the mega-home mortgage lender could soon go belly-up. The piece was written by the ultra-liberal Times columnist Amity Schlaes, who has close ties to the Washington-based American Enterprise Institute (AEI). She notes that the recent chain of events around Fannie Mae, including the sudden loss of $9 billion from the company's books, looks like a perfect script for a new movie produced by Oliver Stone.

Due to its status as a "government-sponsored" enterprise Fannie Mae has grown "into a Stone-scale giant, the world's largest non-bank financial services company. Fannie's work is so extensive that it is quantified with a word the Financial Times' style guide discourages using: trillions."

"A collapse of Fannie is one of the financial world's scarier ideas—scarier, even, than the 1980s savings and loan crisis." Its investors therefore should demand "an early resolution to this story—either through Fannie's nationalization, so that its bonds become like Treasury bonds, or, better, through true privatization." After referring to the recent AEI piece "Privatizing Fannie Mae," Schlaes concludes: "It is time to end Fannie's creepy relationship with government."

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