The US federal government has historically been involved in and has assisted the mortgage markets.

Fannie Mae (FNMA) and Freddy Mac (FHLMC) are Government Sponsored Enterprises (GSEs) and as such were perceived to have low risk. In the early 2000s. Former Federal Reserve Chairman Alan Greenspan stated that these institutions (Fannie and Freddie) were a source of risk to the economy because of their ties to government and their extensive use of debt to finance growth.

1.) In general, discuss what you think the role of government should be in the mortgage markets. Has the government been effective in achieving its original objectives and are those objectives still relevant?

2.) Specifically, discuss the role of these GSEs in contributing to the financial crisis. Consider for inclusion in your discussion some of the following points:

Do you think the GSE structure contributed to their management inefficiencies?

Do you think these GSEs should have been permitted to fail?

Do you agree with former Chairman Greenspan's comment above?