On Freddie and Fannie.
Sep. 10th, 2008 01:09 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
randomnessWhat's lost in all the handwringing over Freddie Mac and Fannie Mae was that from the start they were entities created for the express political purpose of manipulating the housing market. They exist in order to promote what later became called "the ownership society", as a way to fight socialism. Putting more people into houses as owners means more people who have a stake in the defense of private property and of capitalism. Arguably, this was quite effective.
However, it cost money. Now, the bill is coming due. Who pays the bill--and how they pay it--those are the real issues, not why and how the money was spent. They spent the money fighting socialism.
It's therefore rather ironic that rather than see Freddie and Fannie fail, a self-described conservative government has decided ideology be damned. The government must take these outfits over lest they collapse and take down the housing market and the credit market with them, rather than let the market sort everything out, as their ideology would have it.
Of course they're trying very hard to obfuscate all this, rather than have people ask the awkward question of why the fight against socialism, and those who gained from it, should be bailed out by socialism.
Do I think we should prevent a collapse? Yes. Spending some money to engineer a graceful outcome and avoid a chaotic crash is worthwhile. Do I think the taxpayer should be the one to pay for that graceful outcome? No.
We'll see who ends up paying the bill.
However, it cost money. Now, the bill is coming due. Who pays the bill--and how they pay it--those are the real issues, not why and how the money was spent. They spent the money fighting socialism.
It's therefore rather ironic that rather than see Freddie and Fannie fail, a self-described conservative government has decided ideology be damned. The government must take these outfits over lest they collapse and take down the housing market and the credit market with them, rather than let the market sort everything out, as their ideology would have it.
Of course they're trying very hard to obfuscate all this, rather than have people ask the awkward question of why the fight against socialism, and those who gained from it, should be bailed out by socialism.
Do I think we should prevent a collapse? Yes. Spending some money to engineer a graceful outcome and avoid a chaotic crash is worthwhile. Do I think the taxpayer should be the one to pay for that graceful outcome? No.
We'll see who ends up paying the bill.
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(no subject)
Date: 2008-09-10 07:16 am (UTC)One of the motivations behind the American government making sure bondholders don't lose any money is that the Chinese are major holders of Agency debt. They have been more and more public lately in their concern that they not be left holding the bag when and if those two agencies go bust.
Now, bondholders can be assured that the U. S. Treasury stands behind the commitments Freddie and Fannie made. Which in turn means that the Chinese should continue to be willing to buy American debt (i.e., raise the credit line on our Chinese Express card).
In turn, we will use that additional credit line to buy more Chinese goods! Everyone wins! :)
For now.