Fannie and Freddie's Federal Shakedown: A $19-Billion Bargain?

Is $19 billion a lot of money -- or a small price to pay for keeping mortgages available to you at a reasonable price during the ongoing financial crisis and into the future? Ask yourself that as you take in the heated reaction to this news: The government overseer of Fannie Mae and Freddie Mac wants the U.S. Treasury to use that pile of treasure to keep them from collapse.

The latest take comes from Gretchen Morgenson at The New York Times, who asks a provocative question: Why aren't Fannie Mae and Freddie Mac part of the financial reform package going through Congress right now? That's the same question Senate Republicans have been asking. Last week, Sens. Richard Shelby, John McCain and Judd Gregg introduced an amendment to the reform bill that would eliminate Fannie and Freddie over the next few years.

Morgenson brings to her case the liberal economist Dean Baker, who suggests that Freddie Mac is somehow overvaluing new mortgages in order to prop up the mortgage markets. It would seem that we have a consensus across the political spectrum: Fannie Mae and Freddie Mac are a menace to the American taxpayer, vampirically sucking our hard-earned wealth.

Pretty awful, right? Not if you compare it to the garbage loans that Fannie and Freddie's virtually unregulated private competitors were dealing in.