The Nation: Heck of a Job, Bernanke

Heck of a Job, Bernanke
By Nicholas von Hoffman

September 12, 2008



The new star of the Fiscal Disaster of the Week show is Lehman Brothers. The 158-year-old Wall Street house is teetering on the edge of oblivion.

Lehman has been going down for weeks, despite having the privilege of borrowing money from the Federal Reserve using its junky mortgage bonds as collateral. The next question is whether Henry Paulson, the rough-mannered Secretary of the Treasury, and Ben Bernanke, the milder- mannered Fed Chairman, get into their ambulance and scream off to the rescue once again.

Less than a week has gone by since the disastrous duo hooked up to nationalize Fannie Mae and Freddie Mac, the two gigantic home mortgage companies that supply the money for half or more of the house purchases in America. Be not comforted. Taking them over is one thing; knowing what do about them is another.

The two companies have a combined debt of $5.2 trillion--that's $1.7 trillion in unsecured debt and $3.5 trillion in mortgage guarantees.

Is this sum, so large that only advanced mathematicians can picture it, going to be folded into the our national debt, or what? As of now there is no answer to that question. We do not know how the debt is to be handled, we do not know how the companies are to be run or what their ownership structures may be. We know nothing, except that they belong to the government for the time being in some undefined way. ......(more)

The complete piece is at: http://www.thenation.com/doc/20080929/howl