Many US economists, on the right and the left, are today able to say: “I told you so.” Few developments in US financial policy over the past half century have been more controversial than the decision to allow Fannie Mae and Freddie Mac to develop to their great size as private shareholder-owned institutions.

Fannie Mae (originally the Federal National Mortgage Agency) had its roots in New Deal legislation of the 1930s. It was set up in 1938 as a government-owned development bank. Its purpose was to ensure that mortgage interest rates would stay at low levels that kept home ownership within the reach of the US middle class.