Fannie Mae-No Politics (FNMA)

[big-yank]

The GSEs were told to purchase toxic assets because THAT IS THEIR JOB. There was no other mortgage paper to purchase from the banks, and no other way to increase market liquidity and allow banks to originate any new loans. Failure to have done so would have destroyed the domestic housing market, and the U.S. economy. It also would have removed any reason for the GSEs to remain in business.

Would it have been preferable for Treasury to tell FnF to not buy any toxic mortgages? That means the banks are stuck with their nasty loan risk, the banks fail, no loans originate and the economy is thrown into a depression with 25% unemployment.