rogerk2

Nationalization of the U.S. Mortgage Problem

Great article. I have a couple of related thoughts.

1) FNM did just fine for 30 years, until the commercial bankers got their hands on it. Since then, it's been one scandal after another - exorbinant salaries, cooking the books, etc. Now the government has to take it back. We should have kept it as a government operation all along. It's as important to the fabric of American society as social security, medicare, and education. Oh yeah, they want to privatize those too, don't they!

2) Most great societies got that way because they were run by builders. Builders create jobs, make products, and pay salaries to poor people and well as rich people. Societies decline when they change to being run by lenders - people who profit from your misfortune, or from convincing you to live beyond your means. No individual, company, nation, or world can continue living beyond its means forever. It's just a matter of time.

Last century, we were the builders. This century, we got taken over by the financers. Rampant speculation in the 1920's led to the crash, and there wouldn't have been a run on the banks if they hadn't leveraged all their cash out to speculators. People felt, and rightly so, that when you put your money in a bank, it ought to be there for you...not in some risky venture designed to increase the bank's profits.

Today, the BRIC and some developing countries are the builders, and their government controls are keeping the lender-types at bay. Let's see how long that lasts.

Frannie Bailout: Private Profit, Socialized Risk

FNMA was originally started in 1938 as part of the "New Deal" specifically to provide low-cost govt financing for mortgages so people coming out of the Great Depression could buy a house and re-build their perticular version of The American Dream.

The government program did fine for 30 years, including during WWII and the huge home-buying boom that followed. In 1968, amid complaints about this "government monopoly," then President Lyndon Johnson took it "off balance sheet" from the federal budget and privatized it (i.e., gave it to the bankers).

Over the next 40 years, the bankers and their cronies, both public and private, paid themselves huge salaries, bonuses, and perqs to do the same job some lowly bureaucrats had been doing for the previous 30 years. After all, that's what hotshot bankers do...get people in debt, and then live high off the interest.

So now we are re-nationalizing the mortgage loan business, and paying the bankers to give it back to us. Some deal. Next we're going to have to nationalize the airline industry, the auto industry, the agriculture industry, and the healthcare industry. Because of rising costs, the number of jobs involved, and the economic impact if they collapse, they're all candidates for the Paulson bailout waltz.

But what's everybody want to do? Privatize social security. Privatize pension plans. Privatize prisons. Privatize hospitals. Privatize police and fire. Hell, let's privatize the Army - that worked for Rome, for a while. At least we could take the War in Iraq off balance sheet.

In '38 we got the New Deal. In '68 we got the Sweetheart Deal. In '08 we're getting the Raw Deal. We need more government controls on the profiteers, not more privatization. The Free Market doesn't work if it's routinely manipulated by speculators, price fixing, kickbacks, insider trading, off balance sheet and "cook the books" accounting, and gutless auditors, regulators and politicians.