Funny as it may sound: Fannie Mae and Freddie Mac were at the right place at the right time, at the nexus of the greatest demographic bulge of homeownership demand in the history of the world. One hundred million monied boomers and eager immigrants trampling over one another in the last 20 years to get a piece of the great American Dream (and subsidy, we might add).

Thank God the F brothers were well managed to take advantage of the explosion in housing growth and prosperous enough to keep the market liquid enough to handle the demand. Today, when Fannie and Freddie testify before the U.S. Congress, we expect an eloquent defense of their role.

But hubris also set in, we remember years ago when Fannie began behaving like it was extra-special and throwing money around every which way to gain political and media favor. We are not suggesting that it illegally bribed anyone, but the Fannie Mae Foundation was certainly used to gain favor with U.S. Congressmen when they doled out local grant money at press conferences. And they could not do enough to entertain the financial press.

A certain arrogance and slickness became part of the Fannie culture, in particular, as it began to want its way or no way at all. That distorted sense of self is evident today when the secondary market giants take single-handed credit for the homeownership boom.

The arrogance is in part what is behind the face off in Washington D.C., where the Fed Chairman Alan Greenspan, the Bush Administration and many leaders of Congress are calling for much stricter regulation than Fannie and Freddie want.

The defense against stricter controls is don’t rock the housing market. We of course are not in favor of tripping up the great homeownership experiment, but we are also worried that Fannie and Freddie have gotten too big for their own good and the country’s good and need to be taken down a notch.

The only consequences we predict is a humbler secondary market. The housing market will grow no matter how oversized the Fannie and Freddie egos have become.

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