Congratulations, Taxpayers!

You're the proud new owners of a corrupt, bureaucratic, secondary mortgage institution.

Treasury Secretary Henry Paulson says the actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.

BUT WAIT!

Because Secretary Paulson called within the first twenty minutes -- they threw in another failed public political institution! That's right you get TWICE the liabilities!!

I jest. I cry. But mostly, I try to point out that Fan & Fred are textbook examples of the private-public partnership that Senator Obama and the Democrats always claim are the answer. They'll give us a health care Fannie and an energy Freddie. All the profits will go to well connected political types (Franklin Raines, paging Mister Franklin Rains...) and the liabilities will all go to the American taxpayer.

Senator Obama loves to talk about "millions of green collar jobs" that he will create (Government create jobs?) and that he will "put a million hybrids" on the road (government production planning?) Keep in mind that what he will create is a stream of hybrid public-private-not-fish-nor-fowl bureaucracies.

The Fannie and Freddie takeover could be instructive if anyone were listening.

Economics and Markets Posted by jk at September 7, 2008 1:40 PM