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The preferential legal status of Fannie Mae and Freddie Mac serves as one of a number of mechanisms by which the federal government encourages the consumption (and, arguably, the overconsumption) of housing in the U. S. economy-this one with an on-budget cost of zero. But economists are congenitally suspicious of programs that seem to offer something for nothing. After all, a federal guarantee of the deposits in savings and loans cost nothing for many decadesuntil the early 1990s, when it cost taxpayers about 150 billion (U. S. Federal Deposit Insurance Corporation, 1997). Furthermore, Federal Reserve Chairman Alan Greenspan (
Frame et al. (Fri,) studied this question.