The economic difficulties that Fannie May and Freddie Mac have encountered under no circumstances do they justify the intervention by the state. And the spending of billions of taxpayers’ money for their salvage. We have to establish clearly from the start that these two Banks do not embody the idea of a freely functioning market. Neither do they represent an example of market failure.
These two financial conglomerates have been established by a ruling of the American Congress for the purpose of strengthening the construction market on the eve of the Great Depression. They both represent the state’s effort to rule the market and produce economic outcomes. Even after the two Banks were privatized they nevertheless operated under specially designed rules. The interest they charged for the loans they granted were well below current market rates. And this was done under provisions in the law governing their operation.
Their failure therefore was not induced by an unregulated free market. It was provoked by lax rules imposed by the state. Fannie and Freddy failed because of ill thought out government measures. Their difficulties is another indication of government failure. And the spending of taxpayers’ money for their salvage, without some other measures (penalties for mismanagement ,acquisition of assets by the state), is entirely unjustified. | 
