Fannie Mae / Freddie Mac Deconstructed

This article from ProPublica explains the role Fannie Mae and Freddie Mac have played in the housing market and why they are hesitating to help homeowners.  This is another indictment of the system we have created as citizens in the country.  Everyone is in favor of these entities when things are working right -- that is, when the housing market is going up, not down.  They have become controversial now because some people blame them for inflating the housing market.  The problem, in my view, is not that Fannie Mae and Freddie Mac are to blame for the crisis, but rather, that they have an inherent conflict in the way they operate.  Because they are private entities, they are focused on creating maximum profits.  Because the government originally created the entities to reach a policy goal of encouraging home ownership, they also have to answer to policymakers and the public about whether they are meeting that goal.  Taxpayers have backed up the entities because the bets they made have not paid out over the past few years, to the tune of some $165 billion.  However, if 7 out of 10 new loans have been made with a loan guarantee from one of the two entities, would there be many home loans made without them?  It's tempting to view these entities as evil government tentacles reaching into every aspect of the housing market, and the truth is that they have become integrated into the housing market in a very real way.  They are "too big to fail" but also the grease in the wheels of almost every home purchase in the US.  Can we do without them?  Maybe, from a pure market-driven position, but it would be pretty disruptive to just dissolve them.