Article Source Some thoughts about the role played by the GSEs in the run-up in mortgage debt and house prices. Paul Krugman ably lays out the case for why it's conceivable that Fannie and Freddie could have made a contribution: Here's the background: Fannie Mae-- the Federal National Mortgage Association-- was created in the 1930s to facilitate homeownership by buying mortgages from banks, freeing up cash that could be used to make new loans. Fannie and Freddie Mac, which does pretty much the same thing, now finance most of the home loans being made in America. The case against Fannie and Freddie begins with their peculiar status: although they're private companies with stockholders and profits, they're "government-sponsored enterprises" established by federal law, which means that they receive special privileges. The most important of these privileges is implicit: it's the belief of investors that if Fannie and Freddie are threatened with failure, ...

By Jennifer Yousfi Managing Editor After posting four consecutive quarterly losses, CIT Group Inc. (CIT) took a step in the right direction yesterday (Tuesday), announcing it struck $1.8 billion in separate deals with Lone Star Funds and a subsidiary of Warren Buffet’s Berkshire Hathaway Inc. (BRK.A, BRK.B). Dallas, Tex.-based Lone Star will acquire CIT’s home lending business, which has $9.3 billion in assets and related servicing operations, for $1.5 billion in cash and the assumption of $4.4 billion in outstanding debt, MarketWatch reported. In an unrelated deal, Vanderbilt Mortgage & Finance Inc. will pay $300 million for CIT’s prefabricated home loan portfolio. Vanderbilt is the wholly owned financial subsidiary of Clatyon Homes Inc., which was purchased by Berkshire Hathaway in August 2003. “These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class, ...