Posts Tagged ‘bailout’
May 5th, 2010 at 7:43 pm
Freddie Mac Back to Remind You of Its Failures

As Goldman Sachs is reeled into court for potential securities fraud, a bigger fish is still swimming free and wreaking havoc on the public.  Freddie Mac, one half of the not-so-dynamic duo of government-backed mortgage peddlers, took another massive hit during the first quarter of the year.  The company, which is largely owned by the federal government after the 2008 bailouts, is set to ask for an additional $10.6 billion in “federal aid,” aka more bailouts.

With assistance and pressure from Washington to make housing affordable for all, one can see how Freddie Mac thinks that money grows on trees.  Unfortunately, all of us in the real world, from whom the government is funded, should be concerned how “We the Taxpayers” are going to come up with another $10 billion to flush down the toilet.  Not to mention why.

More troubling, while Goldman Sachs is getting grilled at congressional hearings, financial reform legislation, which unleashes a broadside against banks, but not a single provision addressing the troublesome Fannie and Freddie, will soon be ushered to a vote.  The Kansas City Star’s E. Thomas McClanahan stated it well:

“Wall Street’s excesses sent the markets and the economy off a cliff, but the seeds of the debacle were planted by politicians and richly fertilized by their creations: Fannie and Freddie…”

The shenanigans on Wall Street may or may not have brushed up against the law, but the opportunity and incentive would not have existed had the federal government and its lending arms, Fannie and Freddie, not insisted on giving mortgages to folks who could not afford them.  Congress should remember as they point a finger at Wall Street that four fingers are pointing back at them.

April 20th, 2010 at 10:19 am
WaPo’s Ezra Klein: Financial Bill Bailout “Isn’t a Bailout”
Posted by Print

In his best Alice in Wonderland attempt to facilitate the Obama Agenda, Ezra Klein of The Washington Post explains the bailout provision of the Senate’s proposed financial regulation bill and determines that “it isn’t a bailout.”

Klein begins with the rationalization that the bill’s $50 bailout provision “isn’t a lot of money” compared to the $700 billion TARP bill and the House’s $150 resolution fund.  Gee, now that you put it that way, we suppose it’s OK?  Rather than characterize Klein’s logic, we’ll simply accept his own description of the bailout process:

The FDIC takes over the banks.  The $50 billion fund is used to keep the lights on while all this happens.”

In other words, Mr. Kelein, the $50 billion fund subsidizes operations and pays the bills during bureaucratic takeover of an enterprise that should have instead faced the stark prospect of certain failure for its own decisions.  In other words, it continues operations while federal regulators take their time in determining their preferred political outcome.  Protecting reckless enterprises against the consequences of immediate and certain failure will only encourage the very moral hazard that incentivized such recklessness in the first place.  That’s precisely the problem with Washington’s bailout culture.