The Fannie Mae and Freddie Mac Takeover, Isn’t This Socialism?
I’ve been trying to understand the Fannie Mae/Freddie Mac takeover for a few days now, and frankly it makes the LHC and particle physics seem simple in comparison. Granted discussion of things like mortgages and finances is not one of my favourite things, hell, I’d go to a football game (shudder) to get out of a discussion of finances. Still, I think I have a handle on it, and there are a few very interesting points to make. And even if I’m wrong in some regards, I still think this is an important story that should be getting a lot more attention and debate.
The basics. Fannie Mae and Freddie Mac are mortgage companies set up some decades ago to provide mortgages at affordable rates so that more Americans could own homes. They’ve been successful and something half of America’s homes carry one of these mortgages. We’re talking trillions of dollars in debt here, this is not chicken scratch. Well, as home prices started to fall, recently people started defaulting on their mortgages, and pretty soon Fannie and Freddie were in trouble. Bad management, deregulation, and risky investments were also a big part of the picture.
And now the US government has basically seized these two companies to prevent them from going bankrupt, ostensibly to prevent further meltdowns in the USA financial market. As far as I can tell the big danger is that if they failed, it would cause problems throughout the US financial markets. This would ultimately hinder the US government’s ability to borrow money. And since the US government apparently can’t function without deficit spending, that couldn’t be allowed to happen.
Well, my first comment is that the government’s lack of oversight and deregulation, not to mention deficit spending, are largely to blame for this. So the government “had” to step in to “fix” a problem it basically created itself? If that’s even halfway true, I find it very disturbing. Especially since this is going to cost the taxpayers at least 100 billion dollars, once again because the government and the ultra rich screwed up, the taxpayer has to bail them out? How come every time there is malfeasance and incompetence in high places, the taxpayer is the only one that gets punished?
I’ve been told this is the largest nationalization ever to take place. Some have said that this means that if you are paying on one of these mortgages, the money now goes to Uncle Sam. In effect this means the government now “owns” half the homes in America? Shouldn’t this getting more media attention? If the media really did have a liberal bias, this would be trumpeted to the rooftops. Instead it’s being downplayed and mostly ignored.
I also don’t even understand how this is even legal. I thought this was a free country…but the government can just seize businesses without so much as passing a bill or getting a judge’s signature? And isn’t the seizure of private assets and turning them into government assets socialism? One certainly has to assume that the ultra rich are all in favour of this since no one is squawking. Again, I don’t like the implications of that. Has the US treasury just been looted once again before our eyes?
OK, so basically I have a lot of questions about this. More questions than answers. It appears to be yet another case of the taxpayer’s money being used to cover the losses of the ultra rich. And I hate to say it, but another example of the Bush administration’s primary goal for the past five years of so: “Stave off the results of our catastrophically failed policies at whatever cost until we can pass the buck to the next administration.” And they may manage to do it, but God help us all though when we wake up one day and the dollar is worth…nothing.
On the plus side, if the US financial system does a meltdown and destroys Earth as we know it, unlike a LHC mishap, I will be around to say “I told you so.” That will be fun.
(The above image is claimed as Fair Use under US copyright law. Darned if I can figure out who to credit. I like it for several reasons pertaining to this post, but I’ll let the gentle reader ponder that.)