An Ol' Broad's Ramblings
The Do Nothings Should DO NOTHING!
Fannie Mae and Freddie Mac: Congress backs rescue package
World markets are poised for a major relief rally today after the US Congress met in a rare weekend session to pass the most far-reaching rescue package for America’s financial system since Franklin Roosevelt’s New Deal.
The emergency bail-out gives the US Treasury sweeping authority to inject capital into the giant mortgage lenders Fannie Mae and Freddie Mac, which together own or guarantee half the country’s $12 trillion stock of home loans. The ceiling on the US national debt has been lifted by a further $800bn, giving the Treasury almost unlimited resources to prop up the two lenders.
This is utter insanity! Is the federal gubmint going to ‘bail out’ every single business, no matter how large or small, so they won’t go under? The only thing Congress has managed to do is put the nation farther into debt. So many have whined about the national debt, and the inability to pay it down, but what do they do?
In parallel, the Federal Housing Authority (FHA) is to guarantee up to $300bn of fresh mortgages for struggling homeowners trapped with soaring loan costs, often the result of “honeytrap” contracts. The scheme aims to avoid an avalanche of fresh defaults as the housing market continues to deteriorate. Over 740,000 homes fell into foreclosure in the second quarter.
The new bill – reluctantly endorsed yesterday by the White House despite lashings of lard for Democratic special interests – should help to calm the markets after wild gyrations last week. Global bourses have suffered the worst mid-summer sell-off since the early 1930s.
While I have sympathy for those folks who got in over their heads, I do not feel it is my responsibility to come to their rescue with my tax dollars. Does that sound harsh? So be it. We have all had times that were tough, and somehow we’ve made it through. Now, with this latest Congressional fiasco, more and more people will believe they can pretty much borrow themselves into the poor house, and the taxpayers will be there to pick them up.
Hank Paulson, the US treasury secretary, brushed aside complaints that the rescue package amounts to a taxpayer bail-out for shareholders, insisting that the new authority to buy stock is merely intended to reassure investors and may never be activated if all goes well. The authority expires at the end of 2009.
Hank Paulson needs to be horse whipped! No, not literally…..maybe. This bill is wrong is so many ways.
A vocal minority on Capitol Hill now fears that the US government is shielding Wall Street from the consequences of its own folly. The risk of default has been taken over by society as a whole, while investors alone stand to gain from any recovery.
“This bill has moral hazard written all over it: we are letting a monster loose,” said Jeff Flake, a Republican Congressman.
“Monster” is an understatement!
To quote the late, great Groucho Marx: Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Groucho was a very wise man
@Jo:
Yup….that he was.
Every single member that voted for this bill and those that support it (John McCain) need to be horse whipped!
@Sam Pierce:
I do believe the IQ level in D.C. has dropped noticeably in recent years.