PrintSeptember 8, 2008
Fannie and Freddie: GOP Cleaning up Democrat Messes
Grown ups are always having to step in and clean up the messes left by the children. Such is the case all too often in our government.
It was announced yesterday that the Treasury is going to take over the two huge quasi-public lending corporations Fannie Mae and Freddie Mac. In short, without doing this the housing markets would have continued to decline and more problems would have been manifest throughout the entire finanical industry. When you calculate the loss of wealth as home prices and stock prices continue to decline, the consequences would have been almost unthinkable. This is wealth counted on by a lot of middle class taxpyers who depend on their home value and their 401K's for retirement.
(For this reason, do not get swayed by the taxpayer protection arguments against this move. As a taxpyer, and a home owner, this is a win on balance. It will help the value of homes and it may or may not cost the taxpayer. The Chrysler take over decades ago actually ended up benefitting the taxpayers.)
As Treasury Secretary Hank Paulson said this morning on CNBC's Squawk Box,
"I'm not happy about it...but it had to be done. I have to fight the battle that is in front of me." Paulson went on to say that the problem with Fannie and Freddie were ingrained in their respective charters, which is to say put together by Democrat controlled congresses decades ago. Paulson, in great new tone fashion, did not mention which party controlled congress when these charters were drawn up. But I will.
Stock picking guru Jim Cramer, who applauded the move by Paulson, admitted that Fannie and Freddie were in the back pockets of Democrats in Congress. Cramer is normally a big Democrat, though his opinions today indicate that he would be doing intellectual gymnastics to stay that way. These are the two lenders, by the way, that donated millions to Jesse Jackson's various racial organizations over the years. These are the two organizations that backstopped big liberal Anthony Mozillo as his Countrywide Mortgage Corporation sold "predatory" mortgages to undeserving (and apparently financially illiterate) borrowers over the years so he could hand out sweetheart deals to congressional Democrats like Chris Dodd and others.
Warren Buffet, the billionaire investor, also applauded the move by Paulson as "exactly the right thing" to do and indicated that these problems are decades in the making. Buffet was mum on the fact that these institutions are the Democrat's babies and did not elaborate on just what "decades in the making" meant.
Many of the so-called "creative mortgages" were designed in response to politically correct and racially motivate legislation demanding that lenders have more minorities in their customer portfolio. Again, this was not something that came from the right side of the aisle.
And all of this came crashing down as the oil markets soared and people in the sub prime market had to choose between groceries, gas or mortgage payments. More liberal policies at work when you look at our energy situation over the past 30 years of course. Choosing to pay the former, these defaulting mortgages jump-started the mortgage-housing meltdown. These problems were the worst, of course, in liberal-controlled states like Michigan and California where government has driven businesses away and taxes up. And the result has been a cascading down of home values, bank failures and more deterioration of millions of 401K plans. It's no wonder that Dick Armey says that "economic illiteracy" is required to join the Democrat caucus in congress.
So today, the grown ups had to step in and do what they did. This may or may not be good for the taxpayer in all of us. It is certainly necessary for the stockholder and homeonwer in all of us. Even if you don't own a home, this is good for you since having your landlord go broke will not help anyone.
The conservative philosopher in us is split, of course. This is kind of a quasi-socialist step that was needed to correct what were simply liberal fallacies. (makes you wonder if there was a grand plan afterall?) Free marketeers cannot like this part of it. The worst part could the precedent it might set for the auto industry, ailing of course thanks to the liberal energy policies on top of liberal union power.
