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Laying it all to waste

F&F (Fannie & Fraudie) borrowed at cheaper rates than anyone else, levered up to 65:1, and paid their executives handsomely in “amounts that look like lottery winnings to the rest of us. [Newsday]”

“This model was based on the ability of investors to see through one illusion and boosted by their willingness to believe in another. The illusion that investors saw through was the official line that debt issued by Fannie and Freddie was not backed by the government. No one believed this. Investors felt that the government would not let Fannie and Freddie fail; they have just been proved right.” [Economist]

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