THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume XIII, Issue # 50, February 20, 2011
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
GOOD RIDDANCE TO FANNIE & FREDDIE
By Alan Caruba
THE MORTGAGE LOAN COLLAPSE, THE FEDERAL BAILOUT, & THE FEDERAL PUBLIC DEBT: HIGH TIME TO ELIMINATE
SUCH GOVERNMENT-SPONSORED ENTITIES AS FANNIE MAE & FREDDIE MAC & MOVE THEIR ACTIVITIES TO THE PRIVATE
ECONOMIC SECTOR -- THE MESSAGE OF THE VOTERS IN THE NOVEMBER, 2010, ELECTIONS: THE AMERICAN PEOPLE
WANT THE U.S. GOVERNMENT TO STOP PURSUING ECONOMIC & FISCAL POLICIES THAT PUT THE TAXPAYER AT RISK FOR
PRIVATE FAILURES.
FULL STORY:
I have this theory that we, the adults, all function at the emotional level of 13-year-olds, the age of bar mitzvahs in which
the young man can declare to the congregation, “Today I am a man.” (Insert laughter here)
They are, of course, not adults and must wait until the ancient age of 18 to vote and 21 to get plastered. At that age, one
would think that getting a bank loan to purchase a home would be difficult. Until the housing bubble burst, it wasn’t.
Before the financial collapse of the housing mortgage market in late 2008, some banks were making “Ninja” loans — no
income, no job, no assets.
In a recently published book, How the West was Lost: Fifty Years of Economic Folly — and the Stark Choices
Ahead, internationally acclaimed economist, Dambisa Moyo, delivers the bad news:
“When, as early as the 1930s, the United States government
embarked on an aggressive homeownership strategy
designed to get millions of Americans on the housing ladder,
it did not foresee what it was letting itself in for.”
“Distracted by the siren call of home ownership for all,
policymakers inadvertently launched a fifty-year culture of
debt and spawned a generation that set their economies
firmly down a path of economic destruction.”
At the heart of the collapse were two “government-sponsored entities,” familiarly called Fannie Mae and Freddie Mac.
“By promoting a strategy of broad homeownership,
sweetened by subsidy, Western governments have done
more harm than good and are actually contributing to the
demise of Western economies as a whole.”
Ladies and gents, I give you the socialist economies of Greece, Spain, England, Ireland, et al. To which one must add,
of course, the United States of America, the greatest economy on earth since the end of World War Two and one that
still generates a gross domestic product annually of $14 trillion.
Writing on CNNMonday.com, Chris Isidore summed up the problem:
“When the dust settles, the federal bailout of Fannie Mae
and Freddie Mac will be the most expensive government
rescue of the financial crisis — it already stands at $153
billion and counting.”
American taxpayers are on the hook for the debt Fannie and Freddie accumulated before the mortgage loan collapse.
This explains why, on February 9, 2011, the Wall Street Journal reported that the “White House Plans
Revamped Mortgage Market.” How about a headline that says “White House Plans to shut down Fannie and
Freddie”?
In October, 2010, that’s what Emil W. Henry, Jr., the CEO of Henry, Tiger LLC and former Assistant Secretary of the
Treasury from 2005 to 2007, proposed in a Wall Street Journal article. He suggested it was time to eliminate the
government-sponsored entities (GSEs) “moving their activities to the private sector.”
How poor was the oversight by the U.S. Treasury Department? “By the mid-2000s, the GSEs’ process of debt
approval had devolved to a single notification process of Treasury, without any formal process of approval.” Fannie
and Freddie sent Treasury a note!
In January, 2011, Peter J. Wallison, a senior fellow at the American Enterprise Institute, was published in the Wall
Street Journal, “Moving Beyond Fannie and Freddie,” in which he wrote: “If the 2010 election means anything, it
is that the American people want the government to stop pursuing policies that put the taxpayer at risk for private
failures.” You think?
“As off-budget vehicles with virtually unlimited resources,” wrote Wallison, “Fannie and Freddie were ready-made
for political exploitation and advocates for low-income housing … by 2008 half of all mortgages in the U.S.A. — 27
million — were subprime and other high-risk loans, often with little or no down payments by borrowers.”
Ms. Moyo wrote:
“Remember, these banking activities are not illegal.
Banks and bankers are simply operating under the
policies stipulated by the governments. These are
the rules of the game.”
“It is perhaps no surprise that the industry which,
over time, has shown the greatest appetite for risk
is precisely the industry that had the most
government guarantees on its debts: the banking
sector.”
Now, if you have noticed that the word, “government,” keeps popping up throughout this discussion to shutter
Fannie and Freddie, it is no accident. They are creatures of the government, despite the fiction that they were
private enterprises.
The government does not belong in the mortgage loan business and never did. It doesn’t belong in the railroad
business either.
The government controls all of the energy assets of the nation, either as public land or through its regulatory
apparatus.
It allegedly oversees the activities of Wall Street, but that didn’t stop Bernie Madoff from fleecing people of $50
billion. Or the “toxic assets” collapse.
To avoid a complete breakdown of the nation’s financial system, the government had to loan billions to several
banks and one “too big to fail” insurance company. Lehman Brothers did not receive a loan and failed. Other
elements of the nation’s financial sector were forced to merge to avoid collapse or, in the case of Freddie and Fannie,
were seized by the government.
It is the same government that, not only can’t seem to find a commonsense answer to the awaiting disaster of Social
Security, but it is the one that forced a bill through Congress — Obamacare — to increase the number of people on
Medicare, while taking $500 billion out of its account.
If 13-year-olds were running our government, these are the results you could expect.
The decision by voters to give majority power to the Republicans in the U.S. House of Representatives and to elect
some tough Republican State Governors suggests that progress is being made against the excesses and abuses of
power that have brought the nation to the brink of financial collapse. And that’s a good thing.
----------------------------------------
© Alan Caruba, 2011
LINKS TO RELATED TOPICS:
Political Economy -- Philosophies, Systems, & Public Policies:
Government, the Economy, & Economic Prosperity
Fiscal Policy: Taxation & Government Spending
Alan Caruba writes a daily post at http://factsnotfantasy.blogspot.com. An author, commentator and business and science writer,
he is the Founder of the National Anxiety Center, a clearinghouse for information about "scare campaigns" designed to influence
public opinion and public policy.
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THE PROGRESSIVE CONSERVATIVE, USA
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Dr. Almon Leroy Way, Jr., Editor
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