Fannie Mae and Freddie Mac Taxpayer Bailout: will Obama or McCain tell the truth? by gimleteye

The US taxpayer didn't vote for it and no breath of representative democracy stirred behind the staggering failures of fiscal and economic policy that are leading to a bailout of the nation's largest private mortgage institutions, Fannie Mae and Freddie Mac. Those failures have a home in the party of so-called fiscal responsibility: the Republicans.

What a crushing blow this bailout represents to ideologues espousing the "free market". On TV news this past weekend, US Treasury Secretary Hank Paulson, former chairman of Goldman Sachs, announced the bailout, and I wondered what does this guy really feel about the proliferation of financial weapons of mass destruction-- the source of his personal fortune-- that are now silently exploding all around us?

I suspect that Paulson knows that Wall Street and foreign markets will only be breathing temporary relief from the assignment of so much stupid debt to be paid off by you and me; trillions of dollars of obligations, held mostly by nations we are indebted to and whose behind-the-scenes table pounding is what lead to the announcement by the Bush White House.

Of course, there were the production homebuilders and condo developers (who we have been railing against on this blog for nearly two years) and the whole chain of interests tied to the Growth Machine who in aggregate and individually, as in the case of zoning in Miami-Dade County, are responsible for this disastrous state of affairs. Yet they go on, as if there is no one to blame for the worst economic crisis since the Great Depression.

They have imposed their bankrupt realities on the rest of us, in the form of bailouts and, more importantly, a decade of pushing off regulation that could have protected society but interfered with private profits.

Financial insolvency rippling through the nation's premier banks is the direct and indirect result of lax regulation by a Republican Congress and a Bush White House that has been clueless in so many ways. It will take years to assess the true cost of so many missed opportunities for leadership.

That leadership would have looked like this: keeping Wall Street in line with tough regulations making sure that derivative debt was closely monitored and tracked and that all financial institutions, including hedge funds, hewed to the same strict capital requirements. That leadership would have looked like this: putting tight regulations on land speculators, to protect the environment and quality of life of taxpayers in the fastest growing regions of the nation. That leadership would have looked like this: using taxation and regulation to stop unsustainable energy policies from threatening our national security and leadership in the world.

Over the weekend, Barack Obama and John McCain both welcomed the bailout-- which for some micro-massaged message by the Bush administration was spun as a "takeover", presumably a word that better passed the muster of Frank Luntz and focus groups.

Will no one tell the truth? Under Republican leadership we are in the midst of a nationalization of the US financial system.

NYU economist Nouriel Roubini, of the Fannie Mae and Freddie Mac bailout, concluded:

"This plan does nothing to restore the long term viability and efficiency of such institutions. It is just a very expensive taxpayers’ funded bailout of the shareholders and creditors of these institutions. Like the action taken in the Bear Stearns case and other recent government interventions and bailouts of private and quasi private financial institutions this is a form of privatization of profits and socialization of losses; it is socialism and corporate welfare for the rich, well connected and Wall Street."

You may feel it in the value of your home going underwater, either trapping you with a paper loss of staggering proportions, or, causing you to walk away from your mortgage. The captains of government and industry and lobbyists and politically influential; they are walking away-- like the executives of Fannie Mae and Freddie Mac-- but their pockets are stuffed with cash. You may be wondering how the value of your dollars became so pitifully weak, but they have been showered with such excessive compensation that no amount of inflation will affect their standard of living.

This disappearing act of fiduciary responsibility is allowing powerful vested interests to "cash out" while the financial system trembles under the weight.

This already happened once in John McCain's career, in the Savings and Loan Debacle that was a Category 1 hurricane compared to the Category 5 economic storm that is at our shores.

I hope Barack Obama has the courage to say, so, and he better get to it quick.