Monday, September 08, 2008

Game Over: How Bush Bankrupted Fannie and Freddie

No-one can say that the Bush administration weren't warned about this. When the housing bubble collapsed the Bush administration took action which many at the time questioned the logic of:

With the blessing of the Bush administration, the regulator of Fannie Mae and Freddie Mac, the nation’s two largest mortgage finance companies, eased a major restriction on the companies on Wednesday in an effort to unfreeze credit markets and stabilize housing prices.

By reducing the extra cushion of capital the two companies have been required to hold since 2004, the regulator, the
Office of Federal Housing Enterprise Oversight, is enabling the companies to invest $200 billion more in home loans. In essence, the companies are being allowed to take billions of dollars that had been used as a reserve against possible further losses and invest that money now in the housing market.

But critics said that if the housing market continued to decline, the move could put the two companies on a less sure footing and ultimately require a huge taxpayer bailout.
And so we arrive at this:

The Bush administration ripped up years of laissez-faire economic policies last night and launched a government takeover of two of the most powerful mortgage companies in the US. The move is designed to forestall a collapse in house prices that could plunge America into a new Great Depression and trigger chaos on the world's financial markets.

The seizure of the two lenders, Fannie Mae and Freddie Mac, puts a federal guarantee behind an extraordinary $5trn of outstanding mortgage debt, and writes a blank cheque from the US taxpayer that could ultimately run into tens of billions of dollars of support for the country's ailing housing market.

Who said it wouldn't matter if you put an idiot in charge of the White House because he would be surrounded by good advisers?

This will cost the US taxpayer billions and billions of dollars. Credit rating agency Standard & Poor's recently placed an estimated price tag on this worst case scenario: $420 billion to $1.1 trillion of taxpayer's money. And that's on top of the existing deficit of $482bn. And with a war in Iraq which is costing $720 million each and every day.

If the US empire were ever to collapse, I honestly feel historians would date the beginning of it's fall to the day and hour this moron was allowed into the Oval office.

Click title for Gjohnsit's excellent Kos Diary.


daveawayfromhome said...

If the nation collapses within the next year or so, then BushCo will be faulted, otherwise it'll go back to the Reagan administration when the whole deregulation/privatization mania began (not to mention the whole self-fullfilling government-cant-do-anything-right mantra of the Republican party).

Kel said...

I was thinking that Reagan has a lot to answer for with all his calls for deregulation and the general Republican belief that the market always sorts itself out.