Gov't Takeover: Fannie and Freddie

A post of quotes:

From Russel Roberts:

Following its knee-jerk, free-market, Milton Friedman obsessed ideology, the Bush Administration has seized control of Fannie Mae and Freddie Mac.

Joke. A bad one, really. If anything, this is just the latest evidence that it doesn't matter who's President. Is there anything this administration has done lately that reflects a free market philosophy? Yet because the administration sometimes uses the rhetoric of economic freedom, it allows people to paint the administrations policies as market-oriented.

From the Washington Post:

There is no guarantee that the takeover will work, and it comes at a potentially massive cost to taxpayers. The government has pledged to inject money in the companies in any quarter in which they would otherwise be insolvent -- up to $100 billion in total for each company.

"This is a shareholder bailout financed by the U.S. taxpayers," said Armando Falcon Jr., formerly the chief regulator of Fannie Mae and Freddie Mac.

Paulson also announced a separate program in which the government will start buying securities backed by mortgages -- $5 billion worth, initially. That will, in effect, subsidize the purchase of homes by lowering the interest rate that buyers must pay for a mortgage.

From Jon Henke:

This is how government grows...

1. Socialize Risk: Government intervenes in an industry to "solve" some apparent and visible problem.  This is done "for the people."


2. Unintended Consequences: This intervention merely shifts the costs to new areas and sweeps problems under the carpet, where they accumulate.


3. Blame The Market: Government intervention is not blamed, because the people who support it assume their good intentions could not be responsible for bad things.


4. Socialize Profit: The Left demands Something Be Done by people with Good Intentions. Politicians comply.  This is done "for the people."

Unfortunately, our political structure comes at this from four different places.

• Democratic politicians, organizations and activists are happy to go along with Steps 1-4, because, hey, #4 was their goal in the first place.


• Republican politicians and organizations go along with Steps 1-3, only objecting at Step #4.  By which time it is too late.


• Business goes along with Step #1, and attempts to use Step #2 to get more of Step #1.


• Libertarians believe the problem occurs at Step #1.  Once Step #1 is conceded, we've already lost on steps 2-4.  But libertarians and limited government conservatives have relatively little power.