Motivating the change was the central role of the two institutions and the depth of ownership in the paper they have issued. Every major bank, and many mutual funds and pension funds and foreign governments, hold significant amounts of securities issued by Fannie and Freddie, which have been viewed over the years as being almost as safe as treasury securities. A default by either one of the companies could be catastrophic for the financial system.

Which is why we, as taxpayers, have to bail them out. This is not good for the dollar (because of both the increased federal debt and the likely sale of Fannie and Freddie securities held by foreign investors). It’s also very bad news for the economy because they’re now funding 80% of new mortgages and I expect new and increased oversight to result in less lending.