When Do I get My Bailout
I always thought “personal responsibility” was a platform of the modern conservative Republican party, along with “let the market sort things out”.
Turns out that’s true only if you’re not a massive corporation, since Freddie Mac and Fannie Mae are joining Bear Stearns for another taxpayer-funded bailout. What’s that line about private profits, public risk?
the Federal Reserve said it would make one of its short-term lending programs available to the two companies, Fannie Mae and Freddie Mac. The Fed said that it had made its decision “to promote the availability of home mortgage credit during a period of stress in financial markets.”
An official said that the Fed’s decision to permit the companies to borrow from its so-called discount window was approved at the request of the Treasury but that it was temporary and would probably end once Congress approved Treasury’s plan. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300 billion.
The actions, which taken together could provide an overwhelming surge of capital to the companies, were the second time in four months that the housing crisis had prompted the government to scramble over a weekend to rescue a major financial institution. Last March, the Treasury Department engineered the sale of Bear Stearns to prevent it from going into bankruptcy and cause a shock to the financial system…
[snip]
While senior Democratic and Republican officials in successive administrations have for many years repeatedly denied that the trillions of dollars of debt Fannie and Freddie issued is guaranteed, the package, if adopted, would bring the Treasury closer than ever to exposing taxpayers to potentially huge new liabilities. The two companies could face significant new losses this year as the wave of housing foreclosures continues. Officials seemed to suggest, however, that they had little choice but to intervene.
I’m with Atrios on this one: “Fannie and Freddie can be allowed to fail. Their shareholders can eat shit, and they can be reconstituted as a wholesale federal entities. There are zero reasons that I can think of that we should have shareholder owned entities which “probably but not necessarily” are going to get a government bailout every time they need it.”
When do I get MY bailout?
One Response to “When Do I get My Bailout”
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July 15th, 2008 at 12:31 am
Brendan-
Your bailout is going to be the increased inflation rate. The Fed and Treasury have two options to finance the bailout- issue more debt or print more money.
Either way, that means more $ out there. While I don’t predict an honest-to-God hyperinflation, we’re going to see the purchasing power of the $ plummet. Your mortgage and student loans will cost the same as a week’s worth of groceries. The relative share of your income going to debt service will drop.
After all, your income has been going up at least 12% a year to keep up with rising commodity prices, right?
Right?