Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corp., or FHLMC) are examples of what critics call “crony capitalism”—in this case, troubled government-sponsored enterprises (GSEs) owned by private shareholders but financially backed by federal taxpayers. Pushed by politicians to support subprime mortgages taken out by uncreditworthy borrowers, the secondary mortgage market giants were overexposed to risk, leading to the subprime mortgage collapse of 2007 and the recession of 2008.
