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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Tuesday, July 15, 2008

Another fine mess

Billions for business, but when it comes to helping out the little guy, times are tough.

Once more the federal government has moved with lightning speed to prop up the financial system that it has played a central role in weakening -- promising the Federal Reserve will support Fannie Mae and Freddie Mac, the absurdly human names applied to semi-private agencies that buy and sell mortgages.

The key words to take away from the New York Times story about the second Fed bailout -- the first involving Bear Stearns:
The warnings of a potential systemic failure led to the resulting rescue package, and one of the most striking — though unspoken — regulatory shifts in modern times. For decades, Treasury secretaries and Federal Reserve chairmen have insisted that the government did not stand behind the debt of Fannie and Freddie. But the safety net [Treasury Secretary Henry] Paulson announced on Sunday sends the opposite message: that the government is determined not to let either one fail.
The Globe's Steve Syre makes a good case for why this distasteful action is necessary:
In 2008, the year of the government bailout, no other federal rescue plan has become more important to the nation's economic health. The modern mortgage system would fall on its face without Fannie Mae and Freddie Mac and home prices would plunge with it.
The Wild, Wild West of home mortgage business under the Bush dream of an "ownership society" is at the root of the fiscal meltdown that is eating away at the foundations of the American economy, sending the stock market plunging and wiping out millions in retirement savings of ordinary investors who have purchased mutual funds through 401 (k)s at work.

That and the abdication of regulators in the face of the greed and scheming to sell mortgages to people who probably couldn't afford a car, let alone a house.

So, far, it doesn't appear as if anyone involved in foisting this fiscal nightmare on the American public has paid the price.

And while a case can be made that the collapse of the investor-owned mortgage bundlers is too high a price, this is the second Fed bailout of a player this year. Meanwhile, efforts to help the little guy languish in Congress, attacked by the Right Wingnuts as a dangerous bailout.

Because the money doesn't go to prop up billionaires?

And the election of John McCain would change this how?

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