In 2008, the subprime mortgage crisis brought the United States economy to its knees, and six years later, we are still picking up the pieces. On March 11, an agreement between two key senators indicated that they were ready to deal with what many believe is one of the final large pieces of financial reform in the wake of the recession.
A plan was agreed upon by the two top ranking members of the Senate Banking Committee to finally do away with Fannie Mae and Freddie Mac, two mortgage companies that were taken over by the Federal government back in 2008. Both companies have always been government sponsored enterprises, or GSEs, originally created to expand the secondary mortgage market. Fannie Mae was created as part of the New Deal, while Freddie Mac was introduced in 1970 to create competition in the market.
After being taken over in 2008, the Federal government spent $187.5 billion to keep them afloat through 2011, preventing a bankruptcy that would have had a disastrous impact. However, the market has rebounded since, and the government has actually turned that loss into a profit since. Even in the wake of the financial crisis, the two companies, along with the Federal Housing Administration, have continued to back a vast majority of new mortgages.