Now, it's the Federal National Mortgage Association (Fannie Mae, a public entity) and the Federal Home Loan Mortgage Corporation (Freddie Mac, a "privately owned and sponsored government enterprise" -- like the Federal Reserve!), have gone under; and like Bear Stearns and (probably) Lehman Brothers, they have gone to the Feds for a bailout to save the Wall Street barons that ran them into the ground. It is not in the public interest because most of the holders of those mortgages have already been refinanced or foreclosed.
I cannot improve on BizzyBlog's analysis of the situation, and I won't even try. I will note, as he did, that the potential liability to the taxpayers could be as much as $200 billion (which we add to the $53 trillion of unfunded liabilities that Uncle Scofflaw currently owes).
In the mid 1990s, in the process of balancing the budget, President Clinton and the Congress went on an ambitious and mostly successful program of welfare reform, which ended keeping most able-bodied people on the dole without preparing them for useful employment.
Isn't it about time we did the same to Wall Street? The same psychology applies -- why should investment bankers and mortgage lenders be prudent and careful at a risk to their bottom line when the taxpayers are sure to bail them out? BizzyBlog calls it fraud. I think he has a point.
1 comment:
I hate to see Washington bail out Wall Street too, but it's the "golden rule" which is currently at play in America, and has been for some time: The people with the gold make the rules.
I don't know that all of the Fed's effort are going to accomplish much other than keeping the wheels from falling off the broader financial industry before the election.
A side comment on this: aren't a lot of pension funds (what's left of them that is...) invested in these two institutions? When they go under, it's going to affect more than Wall Street.
As usual, James Howard Kunstler has a unique commentary on the situation:
http://www.jameshowardkunstler.typepad.com/
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