If the debate over what to do about Fannie Mae and Freddie Mac were a boxing match, last week's hearing before the House Financial Services Committee would have been the first round, where the fighters circle each other and probe for weaknesses in their opponents.
The ongoing crisis in the housing and mortgage finance markets formed the ring for the battle. Known as government sponsored entities, Fannie Mae and Freddie Mac together formed a large part of the secondary mortgage market for the U.S. before the financial crisis and became dominant afterwards.
After the crisis in mortgage-backed securities came to full flower, the government stepped in and conserved the two mortgage giants as most of the private firms, hedge funds and other entities either folded, merged or got out of the market, leaving the GSEs the last standing.
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