Last weekend, while most of America was still celebrating Christmas, Tim Geithner's Treasury department quietly announced that it is removing the ceilings on government funding which will be provided to Fannie Mae and Freddie Mac.
Prior to this, there was some sense of winding down the two failed GSEs. Not anymore.
Now, these badly-managed quasi-government financial utilities have new leases on life to blunder into even larger messes.
This is the very antithesis of Schumpeterian dynamics. Rather than let failure be punished with death, our government is now doubling down on financial stupidity and bad risk management.
Happy New Year!
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