Paulson: Feeding failure at Fannie, Freddie…Legislate in haste, repent at leisure.
Reform: transitive verb1 a: to put or change into an improved form or condition b: to amend or improve by change of form or removal of faults or abuses2: to put an end to (an evil) by enforcing or introducing a better method or course of action3: to induce or cause to abandon evil ways <reform a drunkard>4 a: to subject (hydrocarbons) to cracking b: to produce (as gasoline or gas) by crackingintransitive verb: to become changed for the betterBased on the definition of reform, how is this bailout considered to be anything but the antithesis of reform?:
TREASURY Secretary Henry Paulson’s bailout plan for mortgage giants Fannie Mae and Freddie Mac should be titled “The Bondholder Relief Act of 2008″: The taxpayers will be providing the relief to holders of Fannie/Freddie debt, many of whom are foreigners.
Paulson has asked Congress for a blank check from the taxpayer to pay off investors for losses already incurred and likely to be incurred in the next few years. He told Congress that, if it promises unlimited funds to backstop the lenders, Fannie and Freddie are unlikely to draw on the credit line. But the nonpartisan Congressional Budget Office estimates the most likely outcome to be a cost of $25 billion over the next two years - and more if housing deteriorates further.
He also wants authorization for Treasury to buy senior preferred shares in Fannie and Freddie. That prompted Sen. Jim Bunning (R-Ky.) to remark that he thought he’d woken up in France. Yes, socialism is alive and well in America - thanks to a Republican Treasury secretary.
Absent from Paulson’s plan is any protection for taxpayers. They’ll fund the downside if losses mount at the two mortgage giants. But if Fannie and Freddie recover, stockholders and management gain. Call it “casino capitalism” - taxpayers bankrolling management high rollers.
The plan doesn’t ask stockholders or management to suffer for their financial indiscretions. The players who put their companies in jeopardy get to stay in charge - Paulson says he isn’t looking for “scapegoats.” Someone should remind him that capitalism without failure is like religion without sin.
There are now three possible outcomes:
* Congress passes the Treasury plan in its current form. That gives us the status quo on steroids - Fannie and Freddie continue to make risky bets and rack up more losses, with the taxpayer guarantee fueling the financial fiasco. This would be the worst outcome, but it’s where we’re headed.
* We could truly privatize the two companies: Remove the federal guarantee and force them to retrench and reform. Fannie and Freddie would have to raise private capital and downsize their bloated portfolios. They’d become just two ordinary-sized financial firms, whose balance sheets would be measured in billions, not trillions, of dollars. A long shot now, this would be the best outcome.
* Nationalize both companies and end all pretense that they’re private. (Fannie was a government agency until 1968; Freddie was only chartered in 1970.) They could return to being federal guarantors and packagers of mortgages, and would hold no sizeable assets themselves. This last approach is called “honest socialism.”
Republicans, especially in the House, have found their political spine and are pushing back against Paulson’s largesse for Wall Street. House GOP Leader John Boehner demands more time to review the proposal - and opposes attaching it to the Housing bill.
That bill has rightly drawn a veto threat from the White House (renewed yesterday). It actually weakens the financial condition of Fannie and Freddie by levying a special tax on them to fund other spending programs. It would certainly be paradoxical to attach a bill to strengthen the two to a bill that weakens them.
The Treasury’s provision of the government’s full faith and credit guarantee to Fannie and Freddie has stabilized the situation. Rather than rush through a bad reform, Congress should get it right. Trillion-dollar businesses should never again be wards of the taxpayer.
Legislate in haste, repent at leisure.
What measures have been put in place to assure us that, we, the taxpayer, aren’t put in this position again? The answer is right in front of your eyes: NOT A DAMN THING
MEGAN MCARDLE ON THE HOUSING BILL:
Instead of moving to put FM/FM into a more easily understood model–either nationalizing them, or privatising–they’re making the GSEs even weirder, and of course, piling on more debt.
It’s time for Congress to bite the bullet: nationalize them, or take them private. But keeping pet companies on a leash so that you can use them as a sort of housing market slush fund, while pretending that the liabilities you thereby create don’t really affect the government, is the kind of thing one expects to see in a banana republic, not a free and prosperous nation.
And then there’s the bill on oil speculation:
The first thing I think is that my liberal friends should stop saying their party is more credible on economic issues. Because this is even stupider than McCain’s doubling down on the gas tax holiday–and McCain’s gas tax mania is plenty stupid. At least McCain’s gas tax manipulations won’t actually do something except give a small amount of additional money to oil companies and loathesome governments. This monstrous bill, on the other hand, might actually do some damage.
Michelle Malkin has more coverage.
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July 24, 2008 - 07:00 AM on July 24th, 2008
Well said… Great information, keep up the great work!
July 26, 2008 - 12:26 AM on July 26th, 2008
You have to begin to lose your memory, if only in bits and pieces, to realise that memory is what makes our lives. Life without memory is no life at all … Our memory is our coherence, our reason, our feeling, even our action. Without it, we are nothing … I can only wait for the final amnesia, the one that can erase an entire life, as it did my mother’s…LuisBu%F1uelLuis Bu?uel, Spanish filmmaker
July 26, 2008 - 11:37 AM on July 26th, 2008
If this is coffee, please bring me some tea; but if this is tea, please bring me some coffee.AbrahamLincolnAbraham Lincoln, 1809-65
August 12, 2008 - 08:08 AM on August 12th, 2008
[...] just doesn’t get it does she? We just bailed out the housing and banking industries to the tune of “They have this thing that says drill offshore in the [...]
September 7, 2008 - 05:28 PM on September 7th, 2008
[...] Paulson: Feeding failure at Fannie, Freddie:Legislate in haste, repent at leisure. [...]