Now, after allowing some of those cronies to get rich quick by bloating up on houses as if the housing market was based on Perpetual Motion (and in case that was wrong, they stocked up the Plan B Solution Warehouse with snake oil), we are being told - I repeat, just being told (as in "read only memory" - you can only receive, not input) that your government has just decided to suddenly "buy", and in effect, "be", Fannie Mae and Freddie Mac, both of whom have become wildly bankrupt and in hopeless debt.
Where is Lyndon Larouche, Jr., now that we need him?
Right on cue, out of the mouths of ... conspiracy theorists.. sometimes come words to think about:
The government has already spent trillions of dollars in the attempt to save the banks, in schemes ranging from the economic stimulus program to the ongoing and accelerating loan programs to the banks from the Fed. None of this has worked, but rather than realize the folly of their ways, the idiots in Washington and Wall Street are cranking the spigots wide open.
Some estimate that the bailout will cost $20-$30 billion, but these estimates are meaningless, since the government is effectively committing itself to an unlimited bailout. Essentially, the government is bailing out the debt by doubling it, creating a even bigger pile of debt that will have to be bailed out, doubling again in a geometric progression. Since there isn't enough money in the world to make this scheme work, it cannot succeed, and the attempt to do it will trigger a hyperinflationary explosion reminiscent of Weimar Germany, such that the very value of the dollar itself will vaporize.
His solution, however, was unclearly described as "the American system" and I couldn't in my economic ignorance figure out how he determined that "essentially, the government is bailing out the debt by doubling it". However, there's not doubt that something terrible has just happened and nobody really quite grasps what will come of it.
There are voices of reason out there in the what would seem to be a forest of insanity. Jim Rogers argues that we don’t need to bail out Fannie Mae Freddie Mac. I agree with Jim Rogers on this. Let the courts handle it and let the taxpayers move on. This isn’t the end of the world, and if we allow these people to get away with it by bailing them out then we we have learned nothing. It is about time we face the truth and move on, not throw good money after bad.
Again, how would "the courts handle it"?? How does he know for sure that "this isn't the end of the world"? Or at least, the world as we know it?
Besides, the issue may be worse than we think. How come the actual, not simply the promissory, bailout occurred immediately after discovering that the books were cooked?
This is no joke: the NYT headline reads "Mortgage Giant Overstated the Size of Its Capital Base" ...
The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced as early as this weekend, came together hurriedly after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.
This is journalistic, safe prose for "cooking the books", fudging the finances, lying, playing with the accounting to look better than reality.
The details of the deal have not fully emerged, but it appears that investors who own the companies’ common stock will be virtually wiped out; preferred shareholders, who have priority over other shareholders, may also wind up with little. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives at both companies will be pushed out, according to those briefed on the plan.
Taxpayer alert: You're paying to save "many foreign central banks". Does this mean we were holding the purse-strings for unknown Other Countries in our little home-owning dream? The network of the global economy gets weirder by the moment. Now we are the financiers for who knows who? We now are paying to "back" those "many foreign central banks" and we don't even yet know who they are.
While it is not yet possible to calculate the cost of the government’s intervention, it could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers. The takeover comes on the heels of a rescue of the investment bank Bear Stearns, which was sold to JPMorgan in a deal backed by taxpayer dollars. Already, the housing crisis has cost investors hundreds of billions of dollars.
Will somebody tell us who is being saved and at the expense of whom? Why don't we just send all those foreign banks to court, as suggested above? Well, I don't know what court... maybe ... a military tribunal? After all, aren't we all interrelated? Well, maybe not that interrelated, not just yet...
But would you have thought buying out a companies that are essentially dishonest to be a good idea for the government?
Accusations of improper accounting are not new for either company. Earlier this decade, both companies paid large fines and ousted their top executives after accounting scandals.
One of the odd accounting blips was using "deferred tax assets" as credits, a sort of theoretical asset based on past "successes", to offset present and future losses.
One analyst estimates the companies, in the future, would have to collect roughly double the profits of the past five years for the credits to become usable. Most financial institutions are not allowed to count such credits as assets in the manner used by Fannie and Freddie.
Maybe that's where Mr. Larouche got his "double the debt" thing. And it certainly doesn't seem a good idea for such a gigantic pair of lenders to be allowed to do voodoo accounting while other businesses have to be held accountable for actual profit and loss, the old-fashioned, non-theoretical way.
Whatever the facts are, one fact remains irrefutable. The housing market is plummeting, the greedy have triumphed, the honest are getting screwed, and the taxpayer is paying. So much for Repuglicanomics. So much for taxpayers' rights from the GOP. They've gutted the economy, cleaned up profits at the people's expense, and are draining us in a war based on lies, draped in flags and flag pins, and are on the verge of turning what's left of America into a third world dumpsite.
For all his faults (he supports the bailout), Barack Obama would at least give us a chance to be free of Republican authoritarianism and supply-side unregulated economic catastrophe. To vote for anyone else would give it back to the GOP to finish the job.