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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 troubled agency's long-awaited audit to finally hit the streets.
Tuesday, September 9 -- 5:27 pm
Test scores stagnated among students with disabilities while their peers' scores rose.
Tuesday, September 9 -- 5:23 pm
The fate of a proposed $409-million downtown skyscraper could be decided Wednesday morning.
Tuesday, September 9 -- 4:31 pm
SURVIVAL IN SAN DIEGO
Two local companies join forces to replace a wheelchair that was stolen from a paralyzed El Cajon woman last week.
Tuesday, September 9 -- 12:24 pm
LETTERS TO THE EDITOR
A truly "strong" mayor would be more proactive in creating a new CCDC board.
Tuesday, September 9 -- 1:59 pm
CAFÉ SAN DIEGO
Prop S will cast its heaviest financial burdens on those least-equipped to deal with it -- young first-time homebuyers.
Thursday, September 4 -- 1:28 pm
COMMENTARY: SLOP
The judge running for city attorney said he would never push for a Chargers stadium if the City Council didn't want one.
Tuesday, September 9 -- 2:08 pm
COMMENTARY: RICH TOSCANO
The government has seized Fannie and Freddie, effectively taking over the bulk of the mortgage market.
Monday, September 8 -- 7:50 pm
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This Just In
EPA refuses the territory the same sewage-treatment waiver it gave San Diego. » Jan. 8 -- 8:34 am
City Attorney's Office is tight-lipped, but mayor's rep says liability could drop.
Jan. 7 -- 7:06 pm
How in the world did the real estate market free a Cunningham briber?
Jan. 7 -- 3:55 pm
SURVIVAL IN SAN DIEGO
A peek inside the under-construction Vantage Pointe.
Jan. 7 -- 2:58 pm
LETTERS TO THE EDITOR
Help readers get to know the new City Council president on a more personal level.
Jan. 7 -- 1:46 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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