Cooking the books.

The WSJ is running this piece

In 2004, along with Jonathan and Peter Orszag, Professor Stiglitz wrote a paper for Fannie Mae in which he "estimated" that the "risk to the government from a potential default on GSE debt is effectively zero." The paper goes on to argue "that the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is just $2 million." Now I understand his Nobel is in economics, not math, but $2 million sounds nowhere near the actual cost so far of $160 billion...

Anybody reading that would be justified in feeling somewhat misled and in being a little angry. However, it is the WSJ that is misleading - the paper was published in 2002 and includes various caveats such as

on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero

and

Fannie Mae and Freddie Mac would likely require government assistance only in a severe housing market downturn. Such a severe housing downturn would, in turn, likely occur only in the presence of a substantial economic shock. Regardless of the structure of the mortgage market, the government would almost surely be forced to intervene in a variety of markets — including the mortgage market — in such a scenario. Fundamentally, given the public’s aspirations to homeownership and the myriad ways in which government subsidies are channeled to homeownership, the government is indirectly exposed to risks from the mortgage market regardless of the existence of the GSEs

It should be remembered that Stiglitz was talking about the order book prior to 2002.

Speaking of fiddling with the record - the owners of the WSJ have been caught out again

News Corporation’s European publishing head, Andrew Langhoff, has been forced to resign following allegations of circulation fraud carried out at the Wall Street Journal.

It seems that fraud, deception and illegal activities are all part of the business model of the Murdoch press.