Posted by
Bob Wood aka TrekTek on Saturday, October 04, 2008 7:40:20 PM
This was an emergency! I know because even most conservative pundits told me (and all of you) that our economy - yea, even the world economy - could not survive without a taxpayer-funded cash investment. It took two weeks for Congress to deal with the "emergency" of catastrophic proportions that needed an immediate fix! But Congress did act - eventually. And what it did collectively is shameful!
The House of Representatives forgot all about the "Representatives" part of its name, and the representatives - forgetting all about their constituents' wishes and in their own infinite wisdom - fell into lockstep with the Senate and passed this turkey of a monstrosity. Previously, the House had defeated a 100-page bill (which had replaced 42-pages, which had replaced 3-pages that the White House handed them) and passed a 450-page bill that nobody had time to read, much less study, before the vote was taken.
So, now everything is right with the world and its financial markets. Right?
Not so fast...
The stock market, which had been up by $300 (DJIA) prior to the vote, closed down $157. That is a $457 drop in the space of a few hours. If this was supposed to be such a great thing for Wall Street, why didn't Wall Street celebrate by going through the roof?
Now I don't claim to be the sharpest knife in the drawer when it comes to such high finance. I am just an average guy, probably like most of you. I work everyday, I take care of things at home, I pay my bills. If I don't have the money for something, I don't buy it! I do have a mortgage, and I have had car payments (which thankfully have ended for the time being.) I now can afford to save a few extra dollars every month so that maybe I won't have to make a car payment again.
I like simple, and the bailout of Fannie Mae and Freddie Mac is not something that lends itself to simple. But these two institutions are not your ordinary companies. They are Government Sponsored Enterprises (GSE's), and I can find nowhere in The United States Constitution a provision for GSE's. In the "real world," companies go belly up every day. Other companies move in and replace the vacuum left behind. But things are different with the federal government, apparently.
I read somewhere that Fannie and Freddie are holding some $12 trillion in mortgages. I assume that each of those mortgages represent some property - houses, land, office buildings - and that those things have some intrinsic value. So, what happens if Fannie and Freddie go toes up?
For one thing, the government would be out of the GSE mortgage business, and that would be one less government problem that needs to be solved in the future. Unfortunately for government, it would once again prove that the government can not run anything as efficiently and as profitably as private enterprise. Government created this mess, and once again the taxpayer takes it in the pocketbook.
For another, I suspect that some of the big banks, insurance companies, mortgage giants, and Warren Buffett's of the world would have bought their assets - the mortgages representing all of that property. Maybe they could have gotten a good deal, like $0.50 on the dollar... or less. The private entities - unencumbered by the "political correctness" of gubmint vote-buying schemes and other corruption - would have then turned a profit on those assets, creating a taxable income which would have provided revenue to pay off the government.
Problem solved! Simple!
Here's Congress' solution. Already running on a $3 trillion budget for this year, soak the taxpayer for another one-fourth - $700 billion. Prop up the corruptness at Fannie, Freddie, and within Congress itself, and life goes on.
And "Oh, yeah, I almost forgot! Add on another 350 pages of pork projects that we could not get to pass on their own merit."
Declan McCullagh, in an excellent analysis
Bailout bill loops in green tech, IRS snooping, writes about some of the non-bailout stuff that no Senator or Representative can defend to his contituents without saying "Well, it's not a perfect bill. But sometimes you have to give up some things in order to get what you must have in the bill. I wish we had time for me to explain it fully to you. By the way, don't forget to vote for me on November 4th."
McCullagh details a lot of unrelated junk in this bill. (Parenthetical remarks below are mine.)
- Renewable energy tax credits (designed to prop up the wind and ethanol industries that can't survive without the taxpayers' help.)
- Tax credits for "cellulosic biofuels" and for "carbon dioxide sequestration." (What the heck do those terms mean?)
- An extension of an alternative fuel credit.
- Tax credits for "new qualified plug-in electric-drive motor vehicles."
- Bicycle commuters get a nod, as do regulations aimed at "residential top-loading clothes washers." (Clothes washers? Bicycles?)
And the IRS gets to continue "undercover" operations against the citizenry as we try to comply with the tax laws that nobody understands - not even the IRS! This one was dead in January 2008, but nobody bothered to bury the corpse and here it is resurrected.
In all fairness, I should point out that President George W. Bush sounded the alarm bells on this looming problem in 2003. Bush proposed tighter controls on Fannie and Freddie at that time. But the Democrats were still having a hissy-fit over the "stolen" election of 2000, and he was summarily dismissed by the likes of Barney Frank, D-MA, in the House and Chris Dodd, D-IL, in the Senate. The latter two said there was no problem, and we must have believed them. Nothing happened. Until now.
Now we have turned over $700 billion to "rescue" the two GSE's, and Treasury Secretary Henry Paulson, one man with three months to go on the job, with the oversight of Frank and Dodd, are going to correct the problem. Paulson says, "We may even turn a profit for the taxpayers." I pray that it will happen. I don't expect it to happen.
Take another look at McCullagh's article, and pay particular attention to the failed entities that our government has propped up with our tax dollars. Now look down at your family's financial stake in these companies.
$17,000 plus.
Did you get your stock certificates yet?
Me, neither...
And California - the bastion of liberal thought and "good government" - is waiting in the wings and begging Wahington, DC for $7 billion to pay its bills. Who will be next?