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Pay Up for Fannie and Freddie
I will begin this blog entry with an allegorical play in three acts -- starring you as the protagonist!
Act I
Your deadbeat brother-in-law shows up at your door and explains that his business, Joe's Exclusively Deep-Fried Seafood and Mortgage Hovel, hasn't been doing so well. You aren't surprised, given that his company is extremely indebted and has been mired in accounting scandals for years.
As a result of his troubles, he has gotten himself into so much debt that he has no chance of paying it off. He asks you and your spouse for a loan.
Act II
Your spouse, sympathetic of course, suggests that you lend Deadbeat Brother-In-Law (DBIL, for the remainder of the play) some money. You suggest to your spouse (Spouse) that since DBIL is unable to pay his current debts, loading him up with yet more debt isn't really a good solution. You also note the unlikelihood of being paid back in such a scenario.
Act III
Without asking you, Spouse dips into the joint checking account and lends DBIL the money anyway. Spouse also makes a big investment in the stock of DBIL's insolvent Mortgage and Deep-Fried Seafood business. But Spouse tells you not to worry: it's in everyone's best interest, and anyway, DBIL wasn't actually having any financial problems in the first place! Also, the stock pays out its dividends in fried clams!
Fin
Well, if you imagine that Fannie Mae and Freddie Mac are the Seafood Hovel, Treasury Secretary Hank Paulson is your spouse (yikes), and you are the U.S. taxpayer, then the above play (except for the part about the clams) pretty much actually took place over the weekend.
As suggested here on Friday, the government announced yesterday that it will further advance the creeping socialization of the U.S. financial system by bailing out mortgage giants Fannie Mae and Freddie Mac. (They didn't use those exact words).
I'll let Bloomberg provide the non-allegorical version:
Paulson, speaking yesterday on the stairway to the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in the companies and lend to them, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
I should note that my use of the word "bankrupt" is a bit of editorializing on my part. After all, Paulson and company -- the same people who insisted all along that there were no problems in housing (as also noted on Friday) -- continue to tell us that Fannie and Freddie are actually not at risk of going broke. I guess that's why they held an emergency Sunday press conference to announce that they'd be throwing taxpayer money at Fannie and Freddie hand over fist.
-- RICH TOSCANO
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The entire SEDC board will consider the agency's compensation policies.
Monday, July 14 -- 4:06 pm
The city councilman asks the independent budget analyst to review SEDC's budget process.
Monday, July 14 -- 1:31 pm
Uniform supply company will pay $45,500 in unpaid wages.
Monday, July 14 -- 1:09 pm
SURVIVAL IN SAN DIEGO
One-quarter of homes repossessed by banks have tenants living in them.
Monday, July 14 -- 3:49 pm
LETTERS TO THE EDITOR
Politicians are jokers.
Friday, July 11 -- 6:48 pm
CAFÉ SAN DIEGO
The real estate market is no longer the gravy train it once was, but the new type of buyer bodes well for the future.
Monday, July 14 -- 12:59 pm
COMMENTARY: SLOP
The School Board member takes one in the chin, Lepine ... wow, and searching for Tony Young.
Monday, July 14 -- 2:08 pm
COMMENTARY: RICH TOSCANO
The taxpayers will now become the lenders to -- and owners of -- the nigh-bankrupt mortgage giants.
Monday, July 14 -- 3:51 pm
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This Just In
More factoids on why a free lunch makes money for San Diego Unified. » Jan. 8 -- 3:07 pm
Hoover tops the list and La Jolla is last.
Jan. 8 -- 2:09 pm
Councilwoman wants talks on retirement benefits.
Jan. 8 -- 2:03 pm
SURVIVAL IN SAN DIEGO
A look at inventory in the first few days of the year.
Jan. 8 -- 3:25 pm
LETTERS TO THE EDITOR
Want to drink recycled sewage? Don't forget to factor human error into the equation.
Jan. 8 -- 2:11 pm
CAFÉ SAN DIEGO
Here's a look at the tangible results MPAs have yielded.
Jan. 6 -- 4:30 pm
COMMENTARY: SLOP
Convicts find freedom, the former city manager of Chula Vista heads to Iraq, and more tidbits.
Jan. 6 -- 7:22 pm
COMMENTARY: RICH TOSCANO
The median-based price indicators closed out a dismal 2008 with another monthly decline.
Jan. 6 -- 4:06 pm
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