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Bottomless Pit By: Charles Payne

In doing a little channel surfing this morning I saw an impressive guy talking about the fact that the SEC and other agencies allowed banks to take on so much risk on their balance sheets. This guy was part of President Obama's financial transition team so I suppose he has influence and the ear of the White House. If that's the case and he is so taken aback by the fact that banks took on so much risk with those toxic assets, then why isn't he sounding the alarm about what's going on with government sponsored entities?

Let's face it, a politicized Fannie Mae and Freddie Mac played one of the largest roles in the housing bubble and now have become something of a Yucca Mountain for toxic assets. The news that these twin agencies are going to be funded with a bottomless pit of money should have spooked the market more than it did. It's obvious that they are going to be used to modify mortgages outside of the private sector or as some kind of backstop to further induce mortgage holders to adjust loans.

Ironically, this is what the TARP program was originally intended to do. But now that plan has become a giant slush fund that Congress and the administration will fight over for years to come. Where does this put taxpayers? It knocks them deeper into the economic abyss. Any home that can legitimately be saved is a blessing, but at some point the reality has to take precedence; failure is part of success and an inevitable part of the healing process.

Unfortunately, it's about political power at the expense of everything, even the eventual economic health of the nation. The thing is that politicians weigh where they can get the majority of votes and that means those in the majority come up short. Obviously, President Obama figured that line to be $200,000 per individual and $250,000 per household. That line pits 95% of Americans against the rest. But the way these guys are spending there has to be a new line established. That new line probably will be expanded out toward the top 25% of earners (taxpayers). Remember, the bottom 50% of income pay only 2.9% of taxes (as of 2007), and maybe they will pay even less when it's all said and done.

It's going to be harder to play class warfare as the government gets drunk on its ambitious plans to grow larger and buy political favors. In the process, however, bankruptcy for the nation becomes more and more a possibility. This isn't a slippery slope but rather a giant dark hole.

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