New data shows that if the U.S. government had not rescued Fannie Mae and Freddie Mac, the secondary mortgage market would have collapsed, leaving the housing market in worse shape with a virtual halt on mortgage lending. In the last year, Fannie and Freddie Mac provided $1.1 trillion in new mortgage credit, while private mortgage-backed securities issuance fell from $900 billion to nothing, according to the Federal Reserve's Flow of Funds data. "A surge in agency (Fannie and Freddie) issuance has offset a total collapse in 'private' MBS issuance," according to the "Follow the Money" blog written by Brad Setser for the Council on Foreign Relations -- private MBS refers to mortgage-backed securities that did not have a guarantee from the secondary mortgage entities. "Agency lending has been absolutely essential," he writes. In February of this year, the Office of Federal Housing Enterprise Oversight, which regulated Fannie and Freddie, lifted...
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