Columbia International Affairs Online: Policy Briefs

CIAO DATE: 04/2011

Fannie, Freddie, and the Subprime Mortgage Market

Mark A. Calabria

March 2011

The Cato Institute

Abstract

The recent financial crisis was characterized by losses in nearly every type of investment vehicle. Yet no product has attracted as much attention as the subprime mortgage. What is generally agreed is that subprime mortgages disproportionately contributed both to the severity of the crisis and to the size of losses imposed upon the taxpayer. What remains in dispute is the role of government—specifically, that of Fannie Mae and Freddie Mac—in expanding the availability of subprime mortgage credit.