Help Responding to Those in Favor of Fannie & Freddie Takeover...

[inflamesdjk02]

So I posted the link to the story about the government taking over the 2 mortgage giants followed by a few choice comments of disgust, and these are the responses I'm getting ...

"dude, government supported capitalism is not socialism. the collapses of freddie mac, bear stearns, et al are direct results of deregulatory legislation and policy and the financialization of the US economy. These are the policies of Reagan, Bush 1 and 2 and Clinton and served the wishes of big US capital, banks and investors. They were not designed by China nor had any socialist componant.

If you study the American economy you will learn that it shifted from manufacturing, production of goods and trade to an economy of financialization and speculation in the 70s, with this intensifying in the past 15 years. Financialization is a way for declining capitalist economies to expand artificially (by economic law capitalism depends on expansion). Thus, money and assets are expanded through speculation, real estate bubbles, stock bubbles, manipulation of foreign curreency, growth of insurance and reinsurance industry, financial bureacracy, etc... This allowed periods of economic health in the US when the economy was really contracting in terms of the production of goods and non-financial services.

In simple terms look at Chicago. The city went through economic collapse with loss of the city and regions manufacturing and industrial production in the 70s. However, they replaced that economy with a burgeoning sector of banking, insurance, commodity trading, real estate, and financial jobs in the past 20 years. Most of these jobs depend on financial bubbles, speculation and banking and produce very little, but they have led to an economic boom for the city.

Socialism and especially communism depend on the means of production being transferred to the workers and population. People are theoretically in charge of their industries and how they work and organize their jobs. In practice many such economies have an influential level of government bureacracy and control, but that is a result of how those countries chose to put the ideas of socialism into place.

In the US you have a decline in somewhat socialist structures. Public hospitols/health, public schools, unions, etc... are all going through a consistent easily documented 30 yr period of contraction and disinvestment. The only aspect of government involvement in the economy that is increasing is defense related spending and corporate bailouts, banking bailouts. Our govt continues to pour huge amounts of our treasury into bailing out banks and huge corporations. It is not putting more money into transferring the means of production and ownership to workers (communism). And it is not expanding public control over things like schools, hospitols, transportation (socialism), instead it has tended to commercialize these things.

those who own our massive debts are keeping our economy and the dollar from freefall. It is only because people like the Chinese hold so much American debt that the dollar isn't worth 50 cents. By insuring the dollar doesn't sink they keep their assets (our debt) relatively intact."

And...

"Fannie Mae and Freddie Mac cannot fail, and the US had to do something. Do you realize that when you go to a bank or mortgage company that most times their loan they provide to you is financially backed by Fannie Mae or Freddie MAC? You might have a house mortgage with XYZ Mortgage company and a car load with National City Bank, but more than likely Fannie Mae or Freddie MAC actually own the loan as the mortgage company and bank financed the loan with one of them.

If you want to continue on without these large companies, it can be done, but your way of life will change. A lot less loans for houses, cars, personal money, and credit cards will be approved and people will need to start going without many things they take for granted because they won't be able to purchase them. Our economy will no longer be anywhere near one of the strongest in the world, and we will slowly fall from our power and stature in the world."

I could probably answer back in a well-informed, intelligent manner but I will have to do some research first. Just wondered what some of you more seasoned veterans thought...

 

[MsDoodahs]

I didn't read it carefully - know that going in.

The one thing that leaps out to me when I skimmed the comment you got near the bottom...

They said:

"A lot less loans for houses, cars, personal money, and credit cards will be approved and people will need to start going without many things they take for granted because they won't be able to purchase them. Our economy will no longer be anywhere near one of the strongest in the world, and we will slowly fall from our power and stature in the world."

Try asking these questions, maybe in finding the answer they'll have to actually think:

What has the impact been of MORE people getting MORE loans for houses, cars, personal money, and credit cards being approved?

If making it super easy for MORE people getting MORE loans for houses, cars, personal money, and credit cards being approved has resulted in those same MORE people being unable to pay the bills that go along with MORE loans and credit cards....is our economy one of the strongest in the world NOW - or is that merely an illusion?

Hope that helps...

 

[acptulsa]

Neither of these 'corporations' were ever capitalism. Both were created by the government. There was never anything free market about them.

And I agree with MsDoodahs. You can't build a healthy economy on credit. It's either solid or it's unhealthy.

 

[Johnnybags]

Gee, the simplest answer for all of it

Neither of these 'corporations' were ever capitalism. Both were created by the government. There was never anything free market about them.

And I agree with MsDoodahs. You can't build a healthy economy on credit. It's either solid or it's unhealthy.

is competition. Wherever there is demand, a supply is created, If fnm and fre failed other entities would arise. Your local bank might actually hold your mortgage. All fnm and fre did was skew the concept of reality for political power, not fill some void. If you could afford a loan for a mtg you got it before, if not you saved more til they said yes, FNM and FRE just wanted the fees and the money upfront and could care less who bought the packaged crap after. Another ponze scheme that kickbacked a plenty to congress.

 

[inflamesdjk02]

Thanks everyone for the replies so far, I appreciate it. Does anyone have a rebuttal for the first quoted passage (I know it's long, sorry about that ...)? I simply just don't have enough knowledge right now to be able to dissect what they're saying and formulate a cogent response.

 

[acptulsa]

"dude, government supported capitalism is not socialism. the collapses of freddie mac, bear stearns, et al are direct results of deregulatory legislation and policy and the financialization of the US economy. These are the policies of Reagan, Bush 1 and 2 and Clinton and served the wishes of big US capital, banks and investors. They were not designed by China nor had any socialist compon[e]nt.

Right. They aren't socialist. They're fascist. And as for 'deregulatory legislation', first that is an oxymoron and second businesses that are determined to fail should fail. As a taxpayer, I have no desire to save the asses of rich stockholders.

 

[dannno]

"Socialism and especially communism depend on the means of production being transferred to the workers and population."

Incorrect. He is right about 'perfect communism' depending on the means of productions being transferred to the people, but socialism is the means of production being transferred to the STATE.

"Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods."

http://en.wikipedia.org/wiki/Socialism


"dude, government supported capitalism is not socialism."

Then what the hell is it?!



Why when the government gives money to poor people it's called socialism, yet when they give money to rich corporations it is called "supporting capitalism" ?!!




Total garbage.

 

[acptulsa]

You might also point out that China now has a more free market than we do. More than one pundit has said it.

 

[jaybone]

A simple response

Allegory of course, but to illustrate a point you could reply with:

Fanny & Freddie guarantee about $5,000,000,000 in mortgages,
There are about 300 million US Citizens,
at least half of those citizens are underage or unemployed/destitute

$5,000,000,000 divided by 150,000,000 = $33,333 for each working American of age.

Would you like to pay by check or credit card?

 

[angelatc]

Thanks everyone for the replies so far, I appreciate it. Does anyone have a rebuttal for the first quoted passage (I know it's long, sorry about that ...)? I simply just don't have enough knowledge right now to be able to dissect what they're saying and formulate a cogent response.

Right off the bat i noticed that "government supported capitalism isn't socialist..." He's right about that - it's fascist.

Other writers have said it better than me, but there is absolutely no reason that the financial markets and the "service economy" will stay centered in America if the manufacturing business moves across the ocean. Ditto the engineering and IT jobs. If the manufacturing is in China, the money and the support services will move to China.

Not to mention that Chicago is home to some of the worst living conditions in the country, some of the most unaffordable real estate in the country, it has the highest sales tax rate in the country, and is slashing spending on parks and children's services to make ends meet. It is also the most corrupt city in the country. It is hardly a shining example of success.

 

[theoakman]

anyone who says Fannie and Freddie need to still be here is retarded and doesn't understand that the problem is that housing prices went too high. That's the only problem. You'd be hard pressed to convince someone it's a problem because they would all like to believe their net wealth doubled over a 5 year span. Others like to believe they made a few hundred thousand by putting no money down and signing a piece of paper. They see no problem with that. The problem is, it's not real, never was, and never will be. If the US manages to inflate its way out of this mess to get the nominal prices to meet 2005 levels, it still won't be real. Our houses will be worth less priced in terms of gold, oil, food etc...

Just tell them, the problem is "housing prices are way too high". Also, ask them what Fannie and Freddie's missions were? They were supposed to keep housing affordable. They fucked up.

If they think it's lack of regulation that caused this, fine. How about we have 1 form of regulation. Make it a law to have at least a 20% for any property purchase in America. That's all you need. Nothing else.

 

[slacker921]

Don't mention Ron Paul.. that'll turn them off..
here.. have them read what Republican Senator Jim Bunning says about it:
http://www.bloomberg.com/apps/news?pid=20601087&sid=alpUsTv3.upI

 

[heavenlyboy34]

"dude, government supported capitalism is not socialism."

Then what the hell is it?!

Fascism.

 

[Zippyjuan]

anyone who says Fannie and Freddie need to still be here is retarded and doesn't understand that the problem is that housing prices went too high. That's the only problem. You'd be hard pressed to convince someone it's a problem because they would all like to believe their net wealth doubled over a 5 year span. Others like to believe they made a few hundred thousand by putting no money down and signing a piece of paper. They see no problem with that. The problem is, it's not real, never was, and never will be. If the US manages to inflate its way out of this mess to get the nominal prices to meet 2005 levels, it still won't be real. Our houses will be worth less priced in terms of gold, oil, food etc...

Just tell them, the problem is "housing prices are way too high". Also, ask them what Fannie and Freddie's missions were? They were supposed to keep housing affordable. They fucked up.

If they think it's lack of regulation that caused this, fine. How about we have 1 form of regulation. Make it a law to have at least a 20% for any property purchase in America. That's all you need. Nothing else.

If they had retained the tradidional 20% down payment, we would not be in the mess we are today. Ten years ago you could not issue a mortgage with less than 20% down.

An interesting article:
http://www.commondreams.org/archive/2008/03/29/7960/

The banking industry objected to regulations put in place in 1989 after the S&L debacle, as well as others dating back to FDR. The heads of the six major U.S. banking associations, according to the National Review, had written "a long letter to the President-elect in December advocating nine substantive reforms." The conservative magazine concluded that the new president seemed more than willing to oblige, but bank deregulation was being held back by such powerful congressmen as "House Banking Chairman Henry Gonzalez (D., Tex.), a populist throwback to the Thirties who believes bankers are by definition out to exploit the 'little guy'" and "House Energy and Commerce Chairman John Dingell (D., Mich.), who holds a quasi-religious belief that banks caused the Great Depression and must be tightly regulated. (Dingell's father was a principal author of the Glass-Steagall Act of 1933.)"

The Glass-Steagall Act was, in fact, a primary target of the Clinton-era deregulation effort. An early piece of New Deal-era legislation, the act was passed in response to speculation and manipulation of the markets by huge banking firms, which most liberal economists believed had brought on the crash of 1929. Glass-Steagall imposed firewalls between commercial banking and investment banking, and between the banking, brokerage, and insurance industries. According to the Center for Responsive Politics, which tracks lobbying and campaign contributions, "Eager to create financial supermarkets that peddle everything from checking accounts to auto insurance, the three industries for years have lobbied Congress to streamline regulatory hurdles that bar such operations."

Despite Bill Clinton's announcement that "the era of big government is over," it took the better part of his administration for him to push these initiatives through Congress. In 1999, Treasury Secretary Robert Rubin, always a good friend to Wall Street, finally brokered a deal between the administration and Congress that allowed banking deregulation to move forward. Shortly after the compromise was reached, Rubin took a top position at Citigroup, which went on to embark upon mergers that would have been rendered illegal under Glass-Steagall. As the New York Times put it, Rubin would be leading "what has become the first true American financial conglomerate since the Depression"-a conglomerate that could exist only because of legislation he had just shepherded through Congress.

Passage of the Financial Services Modernization Act of 1999 was celebrated in a Wall Street Journal editorial as an end to "unfair" restrictions imposed on banks during the Great Depression, under the headline "Finally, 1929 Begins to Fade." But Russell Mokhiber and Robert Weissman, writing in Mother Jones, warned that the legislation, which amounted to the "finance industry's deregulatory wish list," would "pave the way for a new round of record-shattering financial industry mergers, dangerously concentrating political and economic power." Mokhiber and Weissman also predicted that such mergers would eventually "create too-big-to-fail institutions that are someday likely to drain the public treasury as taxpayers bail out imperiled financial giants to protect the stability of the nation's banking system."

Enter Bear Stearns. In addition, the merging of commercial and investment banking helped enable high-risk mortgage lending to make its way into the mutual funds and 401Ks of millions of Americans in the form of mortgage-backed securities. "Diversifying bad debt just spreads the poison," as Frank said in his Boston speech. It also makes a falling housing market reverberate throughout the economy far more than it did even during the S&L collapse. Enter the subprime crisis. And welcome back, 1929.

As these new financial giants go into freefall, a little regulation once again sounds like a good idea, just as it did in 1933. But increased regulation will never come willingly from the Federal Reserve, an "independent entity" that is answerable to no one, and has always operated largely in the interests of the big banks that make up its membership and provide its funding. Under two decades of leadership by the notorious anti-regulator Alan Greenspan, the Fed took a hands-off approach, preferring to set "guidelines" for the financial industry rather than enforce rules. In December 2007, the New York Times compiled a rundown of the multiple warnings and pleas made to Greenspan, over a period of at least seven years, to address the dangers posed by subprime lending-all of them, of course, rebuffed by the man who still claims he couldn't have predicted that the housing bubble would someday burst. The Fed's approach is unlikely to change much now-at least, not without a fight.

The Federal Reserve is set up in such a way that Congress cannot force its hand. But it can apply pressure, by way of threatening to pass legislation to accomplish what the Fed refuses to do. That's what Barney Frank did last summer, when he thought Fed chair Ben Bernanke wasn't doing enough about predatory lending practices. "The Fed has the authority to spell out rules about what is unfair and deceptive," Frank said in an interview with Bloomberg News. "If by default the Fed is not in the process of doing it, we, I think, should pass a law giving the authority" to other government agencies.

Now, in addition to outlining a plan to deal with the epidemic of foreclosures, Democrats on the Financial Services Committee are looking at legislation that could force financial firms to sing for their supper-a few bars, at least. The Financial Services Risk Regulator proposed by Frank last week would have the power to demand "timely market information from market players, inspect institutions, report to Congress on the health of the entire financial sector, and act when necessary to limit risky practices or protect the integrity of the financial system." In return, he said, financial institutions would have "potential access to the discount window for nondepository institutions."

Frank was referring to the lending program for brokers started by the Fed on March 17, which extends the same lending rules previously employed by commercial banks to securities firms. Two days after it opened, Financial Week reported, under the headline "Investment bank CFOs Not Proud," that Morgan Stanley and Goldman Sachs had already overcome concerns that borrowing from the Fed might "make them appear financially weak," and had taken advantage of the discount window, at the new rock-bottom interest rate of 2.5 percent. So Barney Frank's modest proposal simply says that if the government is going to back loans to billionaire investment firms at rates that middle-class credit card holders can only dream about, the companies are going to have to submit to a little oversight in return.

Critics outside the government have taken things a step further, advancing the view that if the taxpayers are going to be responsible for bailing out greedy financial giants like Bear Stearns, they ought to get a piece of them in return, as well as some say in how they are run. Conceivably, the federal government could either take over and run the affected enterprises, or at the very least take a share of the stock in order to exercise control. "I think it makes the most sense to take it [Bear Stearns] over outright," Dean Baker, codirector of the Center for Economic and Policy Research, said in an email last week. "The key point is that we don't want Bear Stearns taking big risks with the public's money. I suppose it's better that we at least share in the gains if they do this sort of gambling, but it would be better to have the government directly step in and not allow the gamble."

Such measures are highly unlikely. But Baker argues that a bailout without some kind of consequences will have no impact at all on the kind of unrestrained, irresponsible behavior on the part of financial firms that got us into this mess in the first place. "The issue here is essentially the moral hazard problem that you had with the S&Ls," he said. "If you have the option of making a bet where the government covers your losses, you might as well make it a risky one."

Senate Finance Committee chair Max Baucus (D-Mont.) also says he wants to "pin down just how the government decided to front $30 billion in taxpayer dollars" to back the sale of Bear Stearns to JPMorgan Chase. He and Senate Banking Committee chair Chris Dodd (D-Conn.) have both said they will hold hearings on the matter. But according to the Center for Responsive Politics, Baucus and Dodd are among the top recipients of donations from the securities and investment industry.

 

[Brian Defferding]

Is Fannie/Freddie really "too big to fail"?

 

[TheEvilDetector]

So I posted the link to the story about the government taking over the 2 mortgage giants followed by a few choice comments of disgust, and these are the responses I'm getting ...

"dude, government supported capitalism is not socialism. the collapses of freddie mac, bear stearns, et al are direct results of deregulatory legislation and policy and the financialization of the US economy. These are the policies of Reagan, Bush 1 and 2 and Clinton and served the wishes of big US capital, banks and investors. They were not designed by China nor had any socialist componant.

If you study the American economy you will learn that it shifted from manufacturing, production of goods and trade to an economy of financialization and speculation in the 70s, with this intensifying in the past 15 years. Financialization is a way for declining capitalist economies to expand artificially (by economic law capitalism depends on expansion). Thus, money and assets are expanded through speculation, real estate bubbles, stock bubbles, manipulation of foreign curreency, growth of insurance and reinsurance industry, financial bureacracy, etc... This allowed periods of economic health in the US when the economy was really contracting in terms of the production of goods and non-financial services.

In simple terms look at Chicago. The city went through economic collapse with loss of the city and regions manufacturing and industrial production in the 70s. However, they replaced that economy with a burgeoning sector of banking, insurance, commodity trading, real estate, and financial jobs in the past 20 years. Most of these jobs depend on financial bubbles, speculation and banking and produce very little, but they have led to an economic boom for the city.

Socialism and especially communism depend on the means of production being transferred to the workers and population. People are theoretically in charge of their industries and how they work and organize their jobs. In practice many such economies have an influential level of government bureacracy and control, but that is a result of how those countries chose to put the ideas of socialism into place.

In the US you have a decline in somewhat socialist structures. Public hospitols/health, public schools, unions, etc... are all going through a consistent easily documented 30 yr period of contraction and disinvestment. The only aspect of government involvement in the economy that is increasing is defense related spending and corporate bailouts, banking bailouts. Our govt continues to pour huge amounts of our treasury into bailing out banks and huge corporations. It is not putting more money into transferring the means of production and ownership to workers (communism). And it is not expanding public control over things like schools, hospitols, transportation (socialism), instead it has tended to commercialize these things.

those who own our massive debts are keeping our economy and the dollar from freefall. It is only because people like the Chinese hold so much American debt that the dollar isn't worth 50 cents. By insuring the dollar doesn't sink they keep their assets (our debt) relatively intact."

And...

"Fannie Mae and Freddie Mac cannot fail, and the US had to do something. Do you realize that when you go to a bank or mortgage company that most times their loan they provide to you is financially backed by Fannie Mae or Freddie MAC? You might have a house mortgage with XYZ Mortgage company and a car load with National City Bank, but more than likely Fannie Mae or Freddie MAC actually own the loan as the mortgage company and bank financed the loan with one of them.

If you want to continue on without these large companies, it can be done, but your way of life will change. A lot less loans for houses, cars, personal money, and credit cards will be approved and people will need to start going without many things they take for granted because they won't be able to purchase them. Our economy will no longer be anywhere near one of the strongest in the world, and we will slowly fall from our power and stature in the world."

I could probably answer back in a well-informed, intelligent manner but I will have to do some research first. Just wondered what some of you more seasoned veterans thought...

The problem with the bailout apart from the obvious, ie. taxpayer getting shafted hard, is that this bailout is going to F&&& up the government bond market.

The bail out will drag government bonds down in quality by raising their yields to that of Fannie/Freddie.

Investors will perceive government bonds as too risky, government wont be able to pay out their obligations because they cant sell new bonds.

Government will default.

It is possible that if Government can't sell its bonds and defaults as result, you may have HUGE Unemployment due to Government Workers and related industry workers being let off payroll
-> RIOTS
-> MARTIAL LAW
-> DICTATORSHIP
-> Good bye USA Constitution.

If you want to know what is going on, read this:

http://www.moneyandmarkets.com/Issues.aspx?Why-The-Fannie-Freddie-Bailout-Will-Fail-2199

I pasted this in my thread:

http://www.ronpaulforums.com/showpost.php?p=1665057&postcount=1

 

[Brian Defferding]

Could Freddie and Fannie be divy-ed up and bought out by a group of other private companies?

 

[HOLLYWOOD]

Right. They aren't socialist. They're fascist. And as for 'deregulatory legislation', first that is an oxymoron and second businesses that are determined to fail should fail. As a taxpayer, I have no desire to save the asses of rich stockholders.

AN the INSIDER "SIDE" of it all:

PIMCO part of Allianz Global Investors:

http://www.allianzinvestors.com/

PIMCO/ALLIANZ Global; Lobbied, communicated, spammed for the Fannie and Freddie BAILOUT by the Treasury.

PIMCO's profits from the TREASURY Bailout: $8 BILLION not bad eh?


I look at this immediate:

$100 BILLION each for Fannie and Freddie BAILOUT
$859 BILLION in Fannie DEBT
$11 BILLION in Immediate Fannie Debt
$4 BILLION in Converted Freddie Debt

How the "officials/officers" of Fannie Mae/Freddie Mac, indirectly LIED about immediate ASSETS of $47 BILLION, but they misleadingly, counted $21 BILLION in TAX CREDITS as ASSETS.

Simply Amazing, single Americans are going to Prison for years, in writing a couple of bad checks, yet this Abusive, Neglectful, Intentional, Colluding operations of SCUMBAGS walk with bonuses, make their secondaries money (PIMCO) and we're left holding the BILL for TRILLIONS.

FASCISM is EXACTLY CORRECT!

 

[theoakman]

Could Freddie and Fannie be divy-ed up and bought out by a group of other private companies?

Fannie and Freddie are worth zero dollars.

 

[inflamesdjk02]

OK, so here are some more rebuttals to the materials that I have posted so far:

"I never said it should be super easy to get loans, but it should be possible to get loans. If Freddie Mac and Fannie Mae failed it would be very, very difficult for even the people with the best credit to get loans."

"Capitalism has always been a government creation to a large degree. The desire for capital, boullion, commercialization and consolidation of land holdings, basically the start of capitalism was driven by governments/monarchies as was colonialism, slavery, expansion of markets through military imposition (all key nation/government efforts) that provided the liquidity, labor and banking opportunities that stimulated capitalist development. There is no land of supply and demand where only free market happiness reigns and government has been replaced by local industry. Capitalism is largely the economic system big powerful countries put in place to best accumulate capital and economic power. When these massive paradoxical private/government bailouts occur it just reminds us that our economic system is more about taking care of the rich than adhereing to any theory that best serves the people."

"There are no alternatives. Over one half of all mortgage loans in the United States are backed by Fannie or Freddie and no private institution could fill that void. Without them, at least right now, there would be no home mortgage financing at all."