The Limits of Blaming Neo-Liberalism: Fannie Mae and Freddie Mac, the American State and the Financial Crisis

Much discussion of the financial crisis has been shaped by an analytical narrative around a state versus markets antithesis of the kind that characterises many critiques of neo-liberalism. Yet in several important respects this antithesis creates a problematic lens through which to see some significant components of the financial crisis. This is particularly apparent if we sufficiently account for the role that the two privately owned but congressionally chartered American mortgage corporations, Fannie Mae and Freddie Mac, played in the crisis. These two huge companies were placed into conservatorship by the American federal government in September 2008. This move gave direct operational control over the corporations to the Federal Housing Finance Agency (FHFA) – an independent federal regulatory agency. At the same time, the American government took effective responsibility for the liabilities of the corporations, which totalled $5.4 trillion. Strikingly, this move was not so much a moment of discontinuity brought about by the explosion of the financial crisis in the autumn of 2008, but in an important sense the culmination of a long-standing relationship between the American state and the two corporations, which had already played its part in the development of the crisis through the subprime-boom.