This article in the Telegraph about the credit crunch that began last year (and has begun to engulf major investment banks and the U.S. Treasury) makes a note of the loss of confidence in Fannie Mae and Freddie Mac. For those of us who have been following this housing market bubble with the kind of acid skepticism that it deserves, finding out that we were right in believing that housing couldn’t out-pace income indefinitely can only bring so much clarity about what’s next for the markets–none of it, probably, any good.

With that in mind, here is what I wrote about Fannie Mae and Freddie Mac [.doc file] in a grad school paper in 2004. I had to frame the issue in the terms of the business ethics course I was writing it for, but for what it’s worth I was quite in a hurry then to pour cold water on these badly designed market inflation machines.

Like most scams, this housing credit disaster has unwound only when the market dipped. It should have been a sign that the end of the bubble was near when a Bear Stearns hedge fund collapsed in June 2007–clearly foreshadowing the near-collapse and pending sellout to JP Morgan Chase for considerably less than the firm’s recent market capitalization that has developed this month. What is Bear Sterns at this point, anyway, but an enormous ill-managed hedge fund itself?

The fact that the Federal Reserve is involved in trying to help bail out Stearns is another embarrassment to and encroachment upon America’s supposedly free markets. Why are those companies not on Wall Street expected to bear the brunt of their mistakes while those on Wall Street and in Greenwich, who have created a risk-management disaster, are to be bailed out? Maybe if there had been some semblance of regulation on hedge funds and other areas of the finanical sector, none of this would have happened–but that wasn’t encouraged in any substantive way by partisan hack charlatan Alan Greenspan, or his already low-rated successor.

When you hear people say, ‘this might be a good time to buy a house, now that the market is down,’ I’d let them know that there’s no hurry. The credit crunch that began in 2007 is likely to continue for a while.