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When announcing the government's decision to seize control of mortgage giants Fannie Mae and Freddie Mac September 7, Secretary of the Treasury Hank Paulson said that the measure provides policymakers with time to decide the “future role and structure” of the government-sponsored enterprises. One hopes this means that there will be a policy debate about how well the two GSEs accomplish their mission, as well as about the value of interventions of government into markets in general.
According to Fannie Mae, the government created the mortgage giant to "expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.” Similarly, Freddie Mac says its "mission is to provide liquidity, stability and affordability to the housing market.” Determining the actual impact of Fannie Mae and Freddie Mac requires careful study. But a general overview of American homeownership might help inform any debate that occurs in the wake of the latest government takeover. The chart below shows the evolution of homeownership rates in the United States since 1965, as reported by Census Bureau. Shaded areas represent business cycle recessions. U.S. homeownership reached around 63 percent in 1965. In 1980, it hit 65.5 percent, after which the rate fell and remained around 64 percent until 1995. Starting that year, the homeownership rate increased faster than it ever had. It peaked at 69 percent in 2004, and retreated somewhat since. Whether the existence of Fannie Mae and Freddie Mac contributed to this increase cannot be shown by this chart alone.
What the chart does demonstrate is that economic conditions influence homeownership. The rate fell during or immediately following most business-cycle recessions, with the most sizable and lasting decrease taking place after the double recession of 1980-1982. The only recession that did not result in a downturn in homeownership was the recession in 2001, a period of extremely loose monetary policy.
Even if Fannie and Freddie did not bring about a substantial increase in overall homeownership, some government involvement in the mortgage market could be justified if it provided access to mortgages for people who would otherwise not qualify.These are usually those who cannot secure private sector financing because they have poor or non-existent credit histories and few assets.
One way to gauge, very approximately, homeownership among households with restricted access to credit is to look at different age groups: Younger households tend to be the ones with less access to credit. The chart below shows the homeownership rates for different age groups since 1982.  While the rate for the youngest group (under 35 years) is considerably lower than that for other age groups, its evolution is similar to that of the national rate. Homeownership among the youngest American buyers falls from 1982 to mid-1990s, rises till 2004, and falls somewhat after that. Overall, the rate of ownership among of those 35 years and younger increased by only 0.5 percent from 1982 to 2000. People aged 35 to 44 and 45 to 54 show similar patterns in their ownership rates, except that in 2007, these rates were actually below those in 1982.
Since homeownership among younger households does not behave differently from that of other households, it's difficult to argue that young people have substantially benefited from any special access to mortgage finance through government programs. Homeownership rates for the oldest households evolved differently than that of younger groups. The rate for those aged 55 to 64 was constant at around 80 percent for the entire period, and the rate for those 65 and over rose steadily--from 74.5 percent in 1982 to more than 81 percent in 2004. It is unlikely that mortgage financing contributed to this pattern. Rising homeownership among those 65 and older is probably caused by improvements in health care that allow larger numbers of older people to live independently. The data suggests that homeownership in the U.S. is affected by the economic conditions and demographic changes. Much less clear is whether government sponsorship of mortgage providing institutions has had a significant impact.
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On your second point – I do not have enough information to answer it informatively. Now that the Fannie and Freddie are under government’s control, it should be easy to examine their books and determine whether there was any mismanagement. Asking your congressman to initiate discussion on this issue in the Congress might be a good way to start.
What I would like to see is who managed Fannie Mae and Freddie Mac from 1994 to 2005 and what was their relationship to Pres. Bill Clinton; and where are they now; and how much money did they personally take out of Fannie Mae and Freddie Mac?