As Nancy Pelosi casts the pieces of "The Paulson Plan" on the waters, Congress on both sides of the aisle might consider their sins of the past.
GSEs--the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks (FHLBs)--collectively dominate the financing of residential housing in the United States. Indeed, these entities have grown to be among the largest financial institutions in the United States, and they now stand behind more than $4 trillion of mortgages--or more than three-quarters of the single-family mortgages in the United States--either by holding the mortgage-related assets directly or assuming their credit risk....The Federal Reserve is concerned about the growth and the scale of the GSEs' mortgage portfolios, which concentrate interest rate and prepayment risks at these two institutions.
Today, America owns Fannie and Freddie, as well as AIG and a good portion of the financial markets. The Bailout would give We, The People, ownership of most of the rest of our mortgages. And, unlike the banks that have fallen, we might make money on them.
But this is not good enough for our Congress-critters:
"Conservatives" say they want the "free market" to buy up the bad mortgages ... buyers with money might include China, the Emirates, or even Japan (Mitsubishi just bought 21% of Morgan Stanley). Conservatives would even provide insurance, so buyers won't take losses. Just The Publick!
"Liberals" would like to set aside 20% of the potential $billions in profits to be made from the bailout for outfits like ACORN, already under investigation for voter fraud.
The Emergency Economic Stabilization Act of 2008 makes insurance optional and ACORN out of the question. So Democrats and Republicans voted against it. No money to be made by politicians, no votes to be gained from special interests. And NO responsibility.
This bailout is not great. It may be necessary. Tiny countries like Luxembourg, Belgium, and Holland just put up $US16.4 billion to bail out one of their banks/insurers. Our Congress has not the guts of small-country parliaments.
Bon Voyage Congress and Parties. Maybe you'll win the next election. With less than forty days and nights to go, you are under Biblical deadlines. If there's anything left to govern two or four years hence, be proud of yourselves.