Doug's Darkworld

War, Science, and Philosophy in a Fractured World.

The Fannie Mae and Freddie Mac Takeover, Isn’t This Socialism?

with 12 comments

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.)

Written by unitedcats

September 10, 2008 at 7:37 am

Posted in Business, Politics

12 Responses

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  1. Deregulation created this problem, as you note, which is to say that the government butted out and the “free market” failed. In fact, Fannie Mae began as a government program which was then privatized, and Freddie Mac was created by the government to compete with Fannie Mae, so rather than calling this socialism, perhaps you should call it deprivatization.

    Mahakal / מהכאל

    September 10, 2008 at 9:26 am

  2. It is called Socialism for the Rich.

    If it looses money, nationalize it,
    If it makes money, privatize it.

    The recent option of ‘walking away’ from your mortgage just ended… since when has anyone been able to walk away from Uncle Sam? They will just get it from you when you file your taxes!

    Amazing still is the neocon view that nationalizing health care is communism (oh my!), but nationalizing a mortgage company is perfectly acceptable!

    We have gone way down the rabbit hole.

    ET

    September 10, 2008 at 2:48 pm

  3. Fannie and Freddie were never really left alone by the government. The government was constantly telling them what to do, when to raise money, when to buy subprime securities to support affordable housing, and on and on. When the government said jump, they had to jump. They were never truly free to run their own businesses like private companies.

    Vanyali

    September 10, 2008 at 3:43 pm

  4. Well they paid themselves outrageous salaries and bribed politicians just like a real company.

    We are hosed and US we knew is no more.

    ET

    September 10, 2008 at 6:12 pm

  5. Yeah, in the USA the boundary between big government and big corporations, not to mention big military, has become increasingly blurred since the 1970s. When one adds to that the fact that the mainstream media has all been acquired by big corporations since then, we have a mix of unbridled and unlimited power not often seen in history. And when unaccountable power has grown to these lengths, the results are usually not pretty. Interesting times indeed.

    unitedcats

    September 10, 2008 at 6:29 pm

  6. It’s nice to find a place where people think the way I do. Ronald Reagan, who the Republicans look to as a god, turned the USA from a creditor to a debtor nation. As taxes are then cut, repaying that debt, actually paying the interest on it, has fallen more and more on the middle class. In the Reagan years they even called it the trickle down theory, only they lied about what trickles down. Those of us who don’t own seven homes are indeed making our mortgage payments to the fed so it can keep the Chinese happy. “Socializing” medicine is “bad” because the insurance industry needs to have its income protected, too.

    miklwald

    September 10, 2008 at 8:56 pm

  7. The takeover of Fannie Mae and Freddie Mac are socialistic. But they are just the start, Rep. Maxine Waters, in a committee hearing on “big oil” said,”guess what this liberal will be about. This liberal will be about socializing…huh…taking over and running your companies.” The mainstream media hasn’t made much of this because the mainstream media is socialistic as well. The Democrats have been talking about bringing back the “Fairness Doctrine” which is just a way of controlling what we, as Americans get to hear in the news, another great aspect of socialism.
    I do like how the Democrats keep talking about socializing everything and being more like Europe then complain about the Republicans and the “neocons”(neocons are actually liberals that woke up and became conservative, and went to an extreme, kind of like ex-smokers on smoking) when we do become one step closer to Europe.
    Rest assured this is only a first step, there will be more to come.

    dcbarton

    September 11, 2008 at 4:45 am

  8. The takeover is legal if the government says it is. Kind of like warrantless wiretaps are legal. Yeah, right.

    PiedType

    September 11, 2008 at 7:52 pm

  9. Neocons are actually fascists.

    Mahakal / מהכאל

    September 11, 2008 at 9:28 pm

  10. I can’t help but notice that if this happened in a country that our government didn’t like, they’d probably tell us all about how bad they were for doing it.

    Blayze Kohime

    September 12, 2008 at 6:46 am

  11. Both parties are faces of the same coin. Both will bring war, and both will bring tyranny. The core of the problem is the Media, and the mindset that has been implanted among the people who worship the media. Under the guise of freedom of speech you are slaves of what is being shown on TV. Thus, if you want to liberate this nation subdue Hollywood first. Subdue those “Musicians” first, and subdue those “Models” first! Do any of them care for you? They do not!

    patorcas

    September 16, 2008 at 6:39 pm

  12. “Subdue Hollywood?” Give me a break. These cons are ridiculous.

    Mahakal / מהכאל

    September 17, 2008 at 4:45 pm


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