5 Dumb Fannie Mae Bailout Assertions That Are Actually Secretly Smart!
Hey, can you even blame all the stupid people saying stupid things about today's Freddie Mac Fannie Mae bailout? This whole thing has been stupid ever since someone decided to call it the Federal National Mortgage Association. Who names something "Federal National?" Anyway, the good news is, no one understood any of this shit back in 1968 when they "privatized" it, and no one — us especially! — seems to really understand it now. We keep LOL-ing at stupid things people say about the biggest-ever government bailout only to reflect a while longer and start to the secret genius of all of it! Let us count the ways:1. "[Freddie Mac and Fannie Mae have] gotten too big and too expensive to the taxpayers." Thanks for sharing, Elle Woods Palin! But ha ha ha, Freddie Mac and Fannie Mae are supposed to be private companies that have nothing to do with the taxpayers who are only now going to find out how "big" and "expensive" their woeful mismanagement is! Of course, in seizing upon this "gaffe" as Democrats did today they kinda missed the whole supposed reason the bailout was "necessary" to begin with, which is to say, that the government exists to protect the plutocracy but also that taxpayers have essentially "implicitly" guaranteed Fannie Mae and Freddie Mac bonds throughout their entire 80-year existences. When the Federal government first announced plans to "privatize" Fannie Mae to help balance the budget in January 1968, an economics reporter at the New York Times named Edwin Dale wrote that the whole thing was a budget "gimmick." By September 1968, Lyndon Johnson aides had appropriated the "gimmick" term themselves, in an Edwin Dale story that employed more smug quotation marks than a Tao Lin prospectus:
By 1980, Edwin Dale was working for Ronald Reagan, so it is not like he is some great hero here. But he was right in 1968: the whole privatization of these mortgage companies was a small feat of financial engineering that changed nothing besides the capacity for rich connected people to get obscenely rich off stock options and taxpayer funds at the same time. 2. "Taxpayers will be on the hook for $200 billion - with a "B" - in capital and credit lines to both Fannie Mae and Freddie Mac. And that's just the starting estimate. When do government projections ever get it right? And when do they ever overestimate the cost to taxpayers?" Hey, good point, Michelle Malkin! Do you think we should contract out the estimate of the taxpayer burden of this bailout to some wizkids in the private sector, such as the ones who accurately projected their banks' exposure to the subprime mortgage market, at least to the closest billion or so, when this whole mess started? Which is to say…oh wait, fucking no one? But no, this brings up another important point: the whole reason the government has to "bail out" its previously-"privatized" mortgage backers is that no one, public sector or private, really does know how expensive it will be, not because they are stupid, but because the whole "freedom" aspect of the "free market" you people love so much allows whoever to unload whatever debt they have whenever they want, meaning that the more all these institutions try to unwind and unload their mortgages onto other institutions, interest rates will rise, the underlying value of the houses the mortgages were underwritten to buy will sink, the risk of foreclosure will increase and more banks will try to unload their debt, which will make everyone's debt actually worse because the underlying assets will be worth so much less, which Paul Krugman explained today is called the Paradox of Deleveraging but I don't think it's really that much of a paradox if you actually learned the concept from It's A Wonderful Life. Anyway, the point is, no, just as Edwin Dale thought it was a "gimmick" that this bullshit was supposed to save the government a billion dollars back when it was "privatized," it's sort of a "gimmick" that it is going to cost taxpayers a quarter trillion dollars now that it is being "nationalized" if you consider what the true cost might be if China started charging real money for all the things we buy from them, which brings me to: 3. "FOR many Americans, Sunday is for church, family lunches or catching a ball game. For the country's financial authorities, it has become the day of the dramatic announcement…" On one hand, this is a really dumb lead, especially for the Economist. On the other hand, everyone except the Economist was quick to point out that Sunday is actually Monday in Asia, and did you know our financial markets are totally related to theirs? The Chinese government owns a couple hundred billion dollars worth of Freddie Mac and Fannie Mae bonds. The Chinese government buys American bonds because they know we are "good for it," since we have always had so much money for their Pokemon action figures and cerulean sweaters and Apple computers. They buy American bonds so interest rates don't go too high, thus inspiring people to cease buying shit they cannot afford, because they need us to keep buying shit we can't afford, because our ill-advised audio equipment purchase is their college fund, and a small shift in our spending habits can equate a large enough shift in their eating habits to trigger widespread social unrest, and if there is anything China and the US agree on "implicitly" it is that widespread social unrest is overrated! So anyway, China keeps its currency cheap so as to keep its potential unrest-causers in jobs, and on the way it generates a lot of extra American dollars for itself that it invests in the American financial markets because America seems "safe." But Chinese people are not entirely sold on this plan! When the government tried to get fancy and invest in one of our hedge funds Blackstone and it didn't work out Chinese went on the internet and wrote stuff like, The foreign reserves are the product of the sweat and blood of the people of China, please invest them with more care! Ha ha ha, that wouldn't really work here. Anyway, bottom line is that they toil away in their sweatshops on Saturdays so we can do whatever we do in those $150 aerodynamic sneakers they are producing and where we can we try to throw them a bone, as with Freddie and Fannie and that whole "stimulus check" thing. 4. "If Fan and Fred share prices rally this week, we'll know Mr. Paulson didn't demand enough." Ha ha ha, the Wall Street Journal editorial page just got preemptively mad at the market (which solves everything) for potentially responding incorrectly to government intervention (which solves nothing.) Ha ha ha, and look what happened! 5. "Remember that we have highlighted the systemic risk posed by Fannie Mae and Freddie Mac because of the very large role they play in housing markets and because of their business practices." That is Bush Administration spokespretty Dana Perino, making the point that everyone might have figured out Fannie Mae and Freddie Mac were in trouble if they had been listening to Bush. That is bullshit of course, but it is true that no one has ever listened to Bush.*