July 14, 2008
When I heard that Freddie Mac and Fannie Mae would be ?nationalized,? my first impression was huh? Is the government next to announce that it?s going to take over public education and the forest service?
Fannie and Freddie were, of course, New Deal projects, both designed as a way to subsidize home ownership. They were then ?privatized? by LBJ, meaning they could use private capital, and were in effect replaced by yet another government program with yet another cutsy, Southern name?Ginnie Mae.
As Lew Rockwell alludes to, there?s a certain contradiction in the political consciousness of many of our countrymen—whereas welfare payments are considered wicked socialism, government?s guaranteeing that every citizen has the ?right? to own a home is thought to be pure Americana. When McCain talked about the nationalization of Freddie and Fannie, it was as if a Democratic senator had suggested abandoning American troops in the battle of Faluja?[Freddie and Fannie] will not fail, we will not allow them to fail ? we will do what’s necessary?
Best of all, when a ?private? organization has all its loans backed by Washington?Bush is actually willing to take on the organizations’ $5 trillion in debt?this leads to some rather generous lending. The boys upstairs are willing to take some pretty wild risks when they feel safe in the knowledge that they?ll never really have to take responsibility if defaults ensue. Uncle Sam will make it right.
Best of all, ?ownership socialism? is lucrative!
As the Times reported this weekend,
In Washington, Fannie and Freddie?s sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years.
And as Fannie and Freddie grew, so did the fortunes of Wall Street, which reaped rich fees from issuing debt for the two companies, as well as the mortgage and housing industries, which banked billions of dollars as the housing market boomed.
Government agencies are usually miraculous in always landing on their feet?Freddie and Fannie transformed themselves from New Deal projects, to ?private? organizations, and finally ended up in the Diversity Industry. As Steve Sailer recently discussed, socialized lending found a new raison d??tre in the national initiative to ?increase minority homeownership.?
It?s been an interesting run for Freddie and Fannie. But with Washington?s clumsy, self-evidently unsustainable re-nationalization efforts, it looks like the game might be up.
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