Freddie Mac deserves a kick in the Fannie

Note: This appeared as an op-ed in the weekend issue of the Valley City Times-Record.


I'm so excited about getting a chance to help bail out Fannie Mae, Freddie Mac, AIG and SOB!

I can't wait to see my dividend checks. Once they're all on their feet and profitable again, I think I'm going to retire and move to Florida.

What's that you say? No dividends?

Well never mind then.

A great deal of nonsense has been written about the collapse of the largest sub-prime mortgage lenders and insurer.

Fortunately, there's been a fair amount of sense written too.

Unfortunately, neither of the presidential candidates are reading it – or are choosing to ignore it.

For one thing, it's not a “failure of the free market.” There is nothing “free market” about subsidizing failure.

For another, it's not even criminal. Pretty much all of what happened was perfectly legal and a result of deliberate policy duly enacted by congress from the highest motives.

Neither was it unforeseen. Among others, Alan Greenspan, former Federal Reserve chairman and Chris Cox, current chairman of the Securities and Exchange Commission both warned for some time the situation with Fannie Mae and Freddie Mac was a catastrophe waiting to happen.

Once upon a time, John McCain did too, but he seems to have forgotten that and is now calling for Cox's job, blaming the whole mess on Cox and the rampant greed of Wall Street.

But the fact is, it's less a matter of rampant greed than rampant stupidity.

Many people more knowledgeable about economics than I have explained this, but the underlying reasons are not hard to understand.

The fact is, Fannie Mae and Freddie Mac are dying because they are mistakes of nature that were never meant to live.

Fannie and Freddie are hybrid monsters, part corporation and part government agency. When they are making money, they're private. When they're hemorrhaging money, they're public. It's been called, “the privatization of profit and the socialization of loss.”

These are, how shall we say? Not the optimum conditions for encouraging good business judgment.

Fannie and Freddie are the major holders of “sub-prime” mortgages, by deliberate policy.

Apparently the diversity commissars have determined that we shall never have a “diverse” society until the demographics of every diverse group in America are exactly the same. Hence the mandating of extending home loans, on terms Donald Trump couldn't get, to "underserved" populations.

“Sub-prime” is code for “probably can't pay it back.”

“Underserved” is code for... you know darned well what it's code for. And the pity of it all is, African-American economists Thomas Sowell and Walter Williams are tearing their hair with frustration trying to point out that with this kind of “help,” minorities hardly need enemies.

Worse, though set up by the government, with implicit government guarantees against failure, Fannie and Freddie are allowed to make massive contributions to political candidates. Giving them, in effect, a license to buy congress.

Does anyone else see how seriously weird this is?

McCain could point out one of Obama's advisors is Franklin Raines, multi-millionaire former head of Fannie Mae.

Obama could point out one of McCain's economic advisors is Douglas Holtz-Eakin, former head of the Congressional Budget Office, who stonewalled attempts by Cox to bring some kind of accountability to the office.

Republicans could point out a bill to more strictly regulate Fannie and Freddie passed the Senate Banking Committee in 2005, but was defeated by a Democratic congress on strict party-line vote.

And Democrats could point out it's a Republican president who is trying to keep Fannie Mae and Freddie Mac on life-support, at a price approaching a trillion dollars and essentially socializing Wall Street, instead of taking the monsters out behind the barn and killing them with an ax.

So now they're fighting about who's to blame for this mess, and who should be trusted to fix it. But whoever wins, we know who's going to lose.

America. You and me.