“Crony capitalism”–and a Jamie Gorelick update
Three Fannie/Freddie-related items for you:
The Foundry takes a look at the left’s crony capitalism.
“Profit-side capitalism and loss-side socialism”, as CEI’s Fred Smith put it, is more accurate.
Jim Lindgren pokes around to find out what Fannie corruptocrat Jamie Gorelick has been up to lately. You won’t be surprised.
The WSJ looks at the way forward with Fannie/Freddie:
The Treasury Secretary wants Congress to give the government more power to rein in the companies, including with a preferred stock capital injection if required. This is progress, but it’s not aggressive enough given the risks. He could make more progress more rapidly toward a safer financial system by putting the companies into federal receivership. If current law doesn’t give Treasury that power – and we hear conflicting legal claims – Mr. Paulson should seek it from Congress.
The Secretary could then appoint a prominent financial figure with bipartisan credibility as a receivership czar, with a mission to protect taxpayer interests. A czar would have the power to replace Fan and Fred’s management and directors, as well as give priority to taxpayers above the current private shareholders if the government does inject capital.
It’s true that this might well require a larger up-front taxpayer contribution. But after Sunday, the taxpayers know they are on the hook for big losses in any case. Putting the companies in federal receivership would insulate them from a political class that has shown itself unable or unwilling to control their risks. Without such a move, the companies could easily use the taxpayer cash as protection in the short run, emerging both larger and more dangerous. Mr. Paulson will have been stripped naked twice.
Receivership doesn’t mean the companies will fold up overnight. They continue to hold trillions of dollars in mortgage assets, and they would continue to buy and package mortgages. But as a first priority, a receiver would be able to rein in their portfolios of mortgage-backed securities (about $1.5 trillion now) that are a major source of their risk. Down the road, as the mortgage crisis eases, the receiver could decide whether to wind the companies down, sell them in parts to the private sector, or let them continue in far more restricted form.
Keep in mind that these semisocialist giants (private profit, public risk) were founded in an era when mortgages were sold and held by the same lender. The idea was that Fannie and Freddie, by buying and packaging those loans, could supply more liquidity to the mortgage market. Whether or not that taxpayer risk was worth it at the time, it clearly isn’t now that the bill is coming due and private companies can do the same thing.
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Absolutely. Many professionals are calling for the government to let these financial Frankensteins die, the sooner the better.
Another example of how New Deal legislation is killing this country. Now I realize why my grandmother absolutely loathed FDR.
Volokh.com:
I believe it. There’s a reason why the Clintonistas are a wealthy lot - and this is one of them.
Had a girlfriend several years ago who went to work for Fannie Mae. Good salary, nice office, NO work to do. She was bored to tears. She told me quite often that FM hires 5 people to do the work of 1. It is basically a government-sponsored jobs program.
Nobody in the MSM ever asks either Obama: You have been sharply critical of the way lenders and big companies do things. Does your criticism include Jim Johnson disguising a 21 million payout from FannieMae for one year? Does your critcism of large banks include criticism of the way Jim Johnson disguised his 21 million dollar payout?
Does your criticism include Jamie Gorelik?
Propping up the weak and the stupid is no way to strengthen the country or the economy.
Why we should not have governmental entities messing with the banking industry:
Why we can’t have Obama, and Democrats in general, in charge of anything:
At what point does the military just take over the country?
Great question Mister P. I think however, that is not something to wish for at any time. Methinks maybe vigilantism will rear it’s ugly head soon enough. Too many people are FED UP with todays Illegal Aliens and Evil Doers.
FYI, by way of this morning’s (Tue 15 July) CNBC: FNM is leveraged 138 to 1.
As mortgage guarantors (including Freddie Mac), that doesn’t bode well. They were able to leverage their fat footprint out to such skinny branchs because in spite of disclaimers on page one of everything they did that the government did not back them, everyone knew/knows that the government [of Chicken Little Congressmen and Senators] does back them.
(I seem to recall that Bear Stearns was leveraged much more prudently at 32 to 1, but take this with a grain of salt, ie confirm elsewhere.)
Whatever happens, one can confidently predict a return of subtle race pandering ads — ‘if it weren’t for them, my family wouldn’t be able to buy a home’. After all, we can’t use this debacle to change anything away from the status quo.
Nutz! “There’s a reason… .” = “There are reasons… .”
Another example(as if we need one)of why we need term limits in Congress. The founders of our nation viewed civil service as just that, service to your country. By putting your life on hold for a few years and going to Washington to serve, you and your family were making a sacrifice for the good of the nation. It was not intended to be a career.
The idea of someone getting re-elected for 40 some years is so abhorrent to me. “Thanks for your service now go get a real job.”
In previous years, the consensus has been that we need a change in congress, as long as it’s not my Congressman that is changed. Similar to the “not in my backyard” theory of building Nuclear power plants or oil refineries.
When you vote in November, vote for the challenger regardless of party. If there is no incumbent, vote conservative. Then the new Congress can be persuaded to change the system, by implementing term limits and doing away with the two party system that has taken us to the disaster we are facing now.
That’s the only way things will change.
FANNIE and FREDDIE are just two more government bureaucracies that would best be handled by DRIVING A STAKE through it’s FRICKIN’ HEART. Than sit back and let the housing market correct itself. Because if we do not do that we only postpone the inevitable results, and the market WILL CORRECT eventually…
If FANNIE and FREDDIE go down the tubes another non-government entity will pick up the slack because there is money to be made in this business. The difference will be that the taxpayers will not be on the hook and the process will be quicker, cheaper, and be more responsive to the customers.
2Big2Fail=2Big4Democracy
Restore the free market.
Get them out now! We cannot waste any more time. We are a nation on the precipice.
Jamie Gorelick is as responsible as any American for intelligence failures related to 9/11. Then she helps loot Fannie. Nice. And she isn’t in jail because….because…the Justice Department wanted to prove Scooter has a bad memory.