With Fannie and Freddie bailout, the U.S. officially becomes Socialist this weekend

And while there are pros and cons, I think on balance this is a good thing.

This is not a bail out. The stockholders will for the most part be whiped out -- they already have been in the amount of 80% of their shares' value.

While I agree that the Bush administration has engineered a massive transfer of wealth from the middle class and poor to the rich, I don't see this transaction along those lines.

This is a nationalization pure and simple. The central government will assume control of the "commanding heights" of the financial sector.

If the housing market and economy eventually recover -- and unlike the "the worse it gets the better for us crowd" I hope these markets do recover -- the federal government may actually profit handsomely.

With the privatization of these previously government owned, New Deal institutions having officially failed, the federal government is stepping in again to assume the ownership that was always implicit in Freddie's and Fannie's unrealistic credit ratings.

Now, why would a bunch of Bush appointed Wall Streeters enact Socialism? Were they Manchurian candidate secret Marxists from college days who have finally implemented their plan to turn the U.S. into post war Labor Party Britain?

No, they are implementing Socialism for the reasons many Socialists have long predicted: because raw capitalism doesn't work. They are implementing Socialism purely as a Darwinian adaptation to reality.

Here's to you Maggie Thatcher, a response to your stupid slogan that about the rawist form of capitalism, namely that "there is no alternative":

Socialism: There is no alternative.

On edit: For a primer on the New Deal origins of Fannie and Freddie, see this thread:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x1561876

neo con mil/ind. men helping each other.

It pretty much started under Reagan, but it's only for Wall St. and the wealthy. Everyone else doesn't get shit.

My new insult for those creeps..

(the managers, not the stockholders) won't suffer a bit.

done in part to prop up the carlyle group, since they were getting clobbered by these losses. I'm not 100% sure how it will bail them out, but rest assured that it WILL.

banks and mortgage lenders (they either buy their loans, or they don't) so there's PLENTY of room for the fed and its cronies to send F&F's money to whomever they please. This will be criminal enterprise being done on a major, major scale. Heck, the whole takeover is criminal; the govt doesn't even have authority to do this until oct 1, I thought.

although that will definitely change. The main thing happening now is that the federal government is buying a huge chunk, probably a controlling share, of the equity of these companies, by purchasing senior preferred stock.

So the government is buying a company, not yet taking on debt.

The debt issue will arise if the federal government in some way becomes liable for the guarantees that Fannie and Freddie have issued on consumer mortgages.

:smoke:

This is too important for them to have a hand in it. It certainly is an intervention to save the banking system, but so far the bailouts have not been particularly generous to management.

In other words, these aren't bailouts of the big shots so much as wipe outs.

The person in charge seems to be Bernanke, who was an academic and takes a fairly theoretical approach.

This isn't the sort of looting by the rich that has characterized almost everything Bush/Cheney have done.

I agree this is Bernanke's doing and the Neo-Cons have been out of the loop.

He's doing his best to avert disaster. According to Krugman, his academic specialty was how to avoid financial disasters like the Great Depression.

At this point, Bush/Cheney and the neo-cons are out of the loop, and basically, as the SMH article posted elsewhere today shows, what is happening is the Central Bank of China, other global central banks and top financial firms are telling Bushco (through Paulson): Do this or else.

Ever seen the movie, "Serpico" about the crusading, anti-payoff NYC cop Frank Serpico? At one point, he is transferred from areas of petty corruption in the Bronx and Manhattan to Brooklyn narcotics. On his first day on the job a detective who knows Serpico's reputation and already hates him, pulls him into a car and says the Brooklyn narcotics cops are taking like $100,000 per month, and adds "That's serious money. And with that, you don't fuck around. You understand? Good. Now get the fuck out..."

That is what is happening to Bush/Cheney. They're telling them, "you may have looted your own treasury and tax base, you may have looted Iraq and New Orleans, but you owe us several trillion dollars. That's serious money and with that you don't fuck around..."

Sounds like China and the global banks are speaking a language * & Cheney actually understand. :yoiks:

The problem is the carnage that would be unleashed on China itself and other foreign central banks during the unwinding of their dollar denominated positions.

As a Chinese official put it, at the end, the old financial system would be completely destroyed and the new system would be completely different. No one knows what it would look like so no one wants to experiment with heading down that road.

:hi:

Even though it still sounds like mafia bosses threatening each other. :yoiks:

Thus it should be broken up into smaller enterprises or be nationalized. If it's so important for the functioning of society that an economic enterprise cannot be allowed to fail it needs to be controlled by society.

"In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward."

In other words, if they make money, then we'll (eventually) get paid back. If they collapse into the bog of their own making, then we're on the hook - for billions, or tens of billions, or hundreds of billions of dollars.