POST OF THE DAY
Macro Economic Trends and Risks
The Nationalization of Fannie & Freddie

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By EddieLuck
September 8, 2008

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The government effectively buying 79.9% of Fannie Mae & Freddy Mac gives it direct control of most of the mortgage finance industry.  Add in the now-allowed direct purchasing of MBS and the now-allowed direct financing of the FHLB without working through the banking system, and you have an effective monopoly of mortgage finance in the government's hands.

Remember that the level of financial expertise in Congress is not high. Remember that two members of the house finance committee thought the dollar was backed by gold until Dr. Paul informed them otherwise this year. Remember that government regulators including the Treasury dept and the fed apparently did not see this coming. They did not heed Mr. Buffet's warning in 2001 and other warnings ever since, and were whipping F&F to finance more mortgages until just a few weeks ago.

Opportunities for graft and illicit deals by high ranking officials are now legion. Remember the wild abuses that took place in the early days of the Resolution Trust when individuals and syndicates were buying banks from the Trust at ridiculously low prices before they got checks and balances going? The crooks cleaned up. The fox is in the henhouse for sure, and this time it's the main hen house, not just the little S&Ls. Whenever you give public servants billions to spend without severe controls, you KNOW we will be thoroughly gouged.

Opportunities for policy blunders of epic proportions are now legion too. These clowns now have a monopoly on the largest finance market in the world, and the ability to control interest rates to a much larger degree than the fed can. Pretty scary when you remember that some of them don't even know what money is, and virtually none of them understand what's going on. Our two "major" presidential candidates certainly don't, although two of the "fringe" candidates do and have been warning about this stuff (fiat money inflation and excessive debt and leverage and the inevitable consequences) for years and years.

The Republican party platform published last week says they will not bail out private companies or interfere in the marketplace. What planet are they on? Just exactly how stupid do they think we are?

No one could call the US more capitalist than China any more. It is just another ripocracy now.

Heaven help us.

Ed.