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Stupid "taxpayer funded" bailout talk
Thursday, July 17, 2008
What's all this talk about Fannie and Freddie (and who knows who else) getting bailed out and the U.S. taxpayer having to foot the bill?
Since when did the U.S. ever pay off old debt with anything other than new debt and why should anyone think that taxpayers would be involved with saving the GSEs?
Some say that the average American is "on the hook" for tens of thousands of dollars in U.S. debt, but does anyone really think that this debt is ever going to be paid off?
Just like the $150 billion stimulus, any Fannie and Freddie bailout will just get tacked on to the national debt and lawmakers will hope that things will return to "normal", which, in this case means continuing to rack up even more debt that we, as a nation, have no reasonable expectation of ever paying down.
At some point, the debt holders will balk and then there will be hell to pay.
The U.S. government is setting the worst of all possible examples for its citizenry by continuing to dig a deeper and deeper hole - no wonder things are such a mess.
12 comments:
you forgot to mention Iraq. look at the red bars drop starting in 2003.
This is a no-brainer, folks. At least $1 tril of the GSE's $5.3 trillion in bonds is held by foreigners. The agencies' bonds should absolutely NOT be guaranteed by the US government. "Implicit, schmicit", those bonds were NOT guaranteed and the holders should get market value for them and not a red cent more. If the gov't wants to preserve mortgage liquidity, let them guarantee only FUTURE MBS's (after taking over FNMA/FHLMC). Existing bond holders should take their medicine.
If the foreigner investors are not protected, they will not buy any more debt, or even worse, they might dump the debt they already hold.
This would cause major problems in our current system, so no way the debt holders won't be protected.
Tim is right, the debt will just get bigger because of this, the dollar will continue to go down and gold and commodities will continue to go higher.
Even all the tough talk about reforming FRE and FNM will only result in minor reforms.
Someday this will all come crashing down, but it won't be tomorrow.
anon, to whom would they dump it?
Reagan proved that deficits don't matter and the increase in debt levels since Iraq has not prevented the Bush Boom and Goldilocks economy.
Larry Kudlow
Inflation is the only mathematical solution to the current problems.
Jim
US Taxpayer: "Ahem, Ben? Step into my office please...
Ben, sheepishly, "why?"
US Taxpyer: "cuz your fucking fired!"
The other $4.3 trillion is probably held in your 401k money market account or safe and secure bond fund.
But there will be hope and change, cheap gas and free sound money!
Tim,
Did you know that there are 24 empty houses for every homeless person in America?
==================================18.6 Million Empty Houses in America. That is what the census says. Andrew Leonard in Salon notes that it is a bit misleading, that "4.7 million are for "seasonal use" only, the Census tells us -- unoccupied vacation homes, in other words. 4.1 million are for rent, 2.3 million are for sale, and the remaining 7.5 million "were vacant for a variety of other reasons."
The census also lists the total number of homeless in America as 759,101, so there are 24 empty houses for every homeless person in America. What a shocking misallocation of resources, materials and energy. ::How the World Works
==================================
I like that "vacant for a variety of other reasons"
Taxpayers aren't the ones on the hook for the bailouts unless taxes will be hiked to fund them - highly unlikely. Currency holders are the ones on the hook. This is an important distinction because big holders of GSE paper also tend to be big holders and buyers of US Treasuries. If GSE bonds are permitted to dump, then so will treasuries and the dollar. Back GSE paper and the dollar and treasuries lose value more slowly but to a lower ultimate floor.
GSEs are just "off balance sheet" vehicles for USA public debt.
The real USA public debt is 9.3 T official + 5.2 T GSEs'...
Franklin Delano Roosvelt was a very wise man. He understood that to get out of the great depression he needed to boost public spending. But how do this without making the US balance looking too bad? Easy: create a special purpose vehicle and call it Fannie Mae...
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