Bailout Nation on Steroids: Fannie & Freddie Set To Get Pumped
Posted by leowalker on 26
In a move to avoid public awareness, the Obama administration removed the maximum bailout caps for Fannie Mae and Freddie Mac on Christmas Eve. The move, which would otherwise have made heads snap, will thus fall into the media void of the Christmas weekend. The previous bailout caps of $200,000,000,000 for each of the semi-non governmental entities were in no danger of being exceeded anytime soon, having used less than 1/16 of the limit to date. Two obvious questions present themselves, were there a journalist in the house to ask them: 1. Why? 2. Why now?
Why now is easy to answer. When these caps were set in 2008 there was a window within which the administration could make changes without the consent of Congress, that window is due to expire at midnight on December 31, 2009. After that date any changes would have to be approved by Congress. This Congress would not have balked at granting the the administration anything it wanted, but would, in Congress’ inimitable fashion, wanted to embellish it somehow. That would have led to a public discussion, which the administration evidently did not want. Some transparency might have inadvertently crept in.
As to why, who better to shed some light than Edwart Pinto at Business Insider dot com. He lists five possible reasons, but this is the bottom line:
The above actions would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on. They would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally these steps would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.
In a nutshell, it nationalizes the mortgage industry.
How surprising. Not.
