Fannie and Freddie: Deadbeats of the Decade

My friends (to borrow a favored McCainism)
we need to start looking at who are true friends are when our own Government bails out China (whose sovereign wealth funds hold a lot of the debt paper at both GSEs) at the expense of our banks and pension funds (Sovereign Bank here in PA held 15% or around $500 million in common stock which equals zilch this morning, most corporate pension funds are likely to be 5% down, which doesn't sound like much but GET THIS, that more than the capital cushion these behemoths operated under, which was only 3%. That means they could lend aka "guarantee" 97% of NOTHING so long as they held cash-in-hand of 3cents for every dollar.... )

"The beginning of the end for the credit crisis or the beginning of the beginning for the US sovereign debt crisis? As many punters are finding out right now, borrowed money has to be repaid some day. The US government is no different in this regard."

Blame Bill Clinton all you want. But just like NAFTA, don't pretend this wasn't Clinton bowing to wishes of the right and implementing their stupid economic ideas.

The fact that Clinton regularly decided to be 'economically conservative', which apparently means 'letting businesses do whatever they want with no regard for the American people' is a completely valid condemnation of Clinton. It is not, however, a very useful condemnation of the left.

As for the fact that Democrats run Fannie Mae and Freddie Mac...those two organizations were not mismanaged. They were defrauded by banks selling them loans they misrepresented as a lot better than they were.

Of course, the mere existence of a organization that bought loans sight-unseen was just asking for that sort of fraud to hurt it, but it's worth pointing out that it seemed to operate okay until the Bush-caused housing bubble and the Bush Administration lack of regulation of banks that were selling it loans.

It's not like this is some problem that's been building since its creation...the loans that are failing now are recent loans. 2006 is the biggest foreclosure year. Loans made under the regulation of Clinton are fine. (And are, in fact, the only thing keeping the system afloat right now.)

As if to prove my point about Fannie Mae and Freddy Mac being far too complicated for the Average Joe to understand, today the Republican V-P candidate revealed that she doesn't know how they work:

"Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers." The companies, as McClatchy reported, "aren't taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization."

Economists and analysts pounced on the misstatement, saying it demonstrated a lack of understanding about one of the key economic issues likely to face the next administration.

"You would like to think that someone who is going to be vice president and conceivable president would know what Fannie and Freddie do," said Dean Baker, co-director of the Center for Economic and Policy Research. "These are huge institutions and they are absolutely central to our country's mortgage debt. To not have a clue what they do doesn't speak well for her, I'd say.""

Frankly, I don't really blame her. I used to be a financial reporter, and I had difficulty understanding them myself. But it points up the hazard of running a crackerbarrel candidacy against the pointy-headed elites...as does, for that matter, much of the Bush administration.