Monday, September 8, 2008

Fannie and Freddie go KABOOM! And Taxpayers get screwed.

Well, it finally happened just as fiscal conservatives and small government advocates warned that it would; Fannie and Freddie Mac have been taken over by the federal government—the largest bailout EVER! That means, dear reader, that you and I are stuck with a massive tax bill. Ka-Ching! Congratulations to us…the suckers.

For decades, libertarian think tanks like the Cato Institute, have sounded the alarm on the potential hazard of having giant government sponsored enterprises (Fannie and Freddie) continue to operate too cozily to the federal government. Of course, calls to completely sever the two GSE’s from any Federal protection and advantage were always met with resistance from the left side of the political spectrum. No surprise there. Fannie and Freddie were therefore encouraged to reckless expansion as they took on more and more risky bundles of mortgages from lenders in order to swap them for mortgage-backed securities. But so what right? They’re doing it for the public good and people need housing even if they can barely afford them. Besides, the federal government has their back.

The hapless figure in all of this is Treasury Secretary Henry Paulson who a while back had offered the beleaguered GSEs and their patrons in Congress a blank check signed by the taxpayers promising potentially unlimited funds to backstop the lenders. House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd thought that this was a wonderful idea. Mr. Paulson has obviously acquiesced to the Democrats and the mindset that exists in Washington about “doing something.” Unfortunately, President Bush will go along will all of this.

All of this is the latest example of the waste, crony-capitalism, political trading, and bureaucracy that has gripped Washington for decades. Americans really need to come to understand that government is a poor substitute for free-markets. Until that happens, we will see more waste of taxpayer’s funds and more problems with government largesse.


Flo said...

And why aren't the folks in charge of Freddie and Fannie being brought up on charges?? They literally cooked the books over a billion dollars worth. Ken Lay got cruicified for Enron and that was only $500 million +/-. Everyone responsible needs to be held responsible even if it's Congress!!!

Brutus said...

I think you will also find that the People's Republic of China was the single largest investor in bonds of Fannie and Freddie and had their investment saved by this decision. China held more protected debt than the next three investors (Japan, Russia and South Korea) combined. The ChiComs held almost $400 billion in debt.

Isn't it funny how the capitalists came to the rescue of the communists?