What Happened With Fannie And Freddie In 2008? We May Never Know

The "sordid history" of Federal National Mortgage Assct Fnni Me FNMA "Fannie Mae," Federal Home Loan Mortgage Corp FMCC "Freddie Mac" and the U.S. government may not read like the juiciest celebrity gossip, but the story may be reopened, exposing, as Rolling Stone writer Matt Taibbi called it, "one hell of a big pile of carefully guarded secrets."

Totaling at least 11,000 documents, the government communication logs are likely to cover the breadth of the government's seizure of the mortgage twins.

Why Were The Documents Hidden To Begin With?

Citing the belief that the release of the documents would "negatively impact global financial markets," Taibbi explained how the reveal is more intriguing than it may appear on surface.

"The sheer breadth of the effort to keep this material secret may not have a precedent in modern presidential times," Taibbi said. "'It's the mother of all privilege logs,' explained one lawyer connected with the case. The Obama administration invoked executive privilege, attorney-client and deliberative process over this documents and insisted that their release would negatively impact global financial markets.

"But in finally unsealing some of these materials last week, a federal judge named Margaret Sweeney said the government's sole motivation was avoiding embarrassment."

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'Avoiding Embarrassment'

Sweeney elaborated, "Instead of harm to the Nation resulting from disclosure, the only ‘harm' presented is the potential for criticism […] The court will not condone the misuse of a protective order as a shield to insulate public officials from criticism in the way they execute their public duties."

What's Likely In The Pile Of Papers

Seven documents have been released thus far, and the biggest reveal has been that the government was aware GSEs "weren't in a ‘death spiral,'" and was contrarily "quite confident in their future profitability well before it changed the bailout terms."

Taibbi was quick to point out, "Contrary to popular belief, the one thing they (Fannie and Freddie) weren't guilty of was causing the 2008 crash."

"In fact, it's a little-known subplot of the financial crisis that bailout-era Fannie and Freddie was turned into a kind of garbage facility for other Wall Street institutions, buying up toxic mortgages that private banks were suddenly desperate to unload."

Taibbi speculated that the remaining sealed documents could hold a "wealth of information" regarding Fannie and Freddie's futures, which could subsequently be "a huge looming event in the history of American finance."

Taibbi surmised that government officials and Wall Street lobbyists may be planning a consortium of banking interests from the private sector "step into the shoes of Fannie and Freddie."

"If this concept actually goes through," Taibbi said, "it would be the unlikeliest of coups for Wall Street. Having nearly triggered a global depression eight years ago, the usual-suspect, too-big-to-fail banks would essentially be put in control of the same housing markets they all but wrecked last time around."

Will We Actually See The Documents?

Judge Sweeney has not issued a final verdict regarding the public release of the document cache.

As Taibbi said, "The only thing that is clear is that there's something odd going on, with the Obama administration asserting privilege over a volume of papers so large, it would make Nixon blush."